If the report shows strong job growth and moderate unemployment, this could reduce the likelihood of a rate cut in December. Such an outcome would strengthen the dollar and likely weigh on gold prices by increasing the opportunity cost of holding non-performing assets. Conversely, weaker-than-expected jobs data could reinforce expectations for rate cuts, weakening the dollar and supporting gold prices.
Is inflation the Fed’s next move?
Key PCE inflation data released last week showed persistent inflationary pressures, complicating the Federal Reserve’s ability to move aggressively toward rate cuts. Nevertheless, expectations for easing remain, with market prices showing a 66% probability of a 25 basis point cut in December.
The performance of the dollar will remain a crucial factor. After falling midweek, the dollar ended November higher, buoyed by the prospect of prolonged high interest rates. If Friday’s jobs data fuels expectations of tighter Fed policy, further dollar strength could limit any potential gains for gold.
Can geopolitical risks keep gold afloat?
While safe haven demand was subdued earlier this week on optimism over ceasefire negotiations in the Middle East, lingering risks such as the ongoing conflict between Russia and Ukraine are providing a floor for gold prices. Increased geopolitical tensions could reignite demand for the precious metal, especially if market sentiment turns risk-averse.