Jobs data dampens optimism about the interest rate cut
The U.S. Nonfarm Payroll Report revealed an increase of 227,000 jobs in November, exceeding expectations of 200,000. However, weaker private wage growth led to a more cautious labor market picture. While traders still see a strong chance of a 25 basis point rate cut at the Federal Reserve’s December meeting, Chairman Jerome Powell’s positive economic outlook has cooled hopes for aggressive monetary easing. This story weighed on gold’s performance all week.
Institutional caution is reflected in ETF outflows
Outflows from gold-backed exchange-traded funds continued, signaling weaker institutional demand despite geopolitical instability. Market participants appear reluctant to commit as they wait for clarity from inflation data and Fed guidance. This caution has contributed to gold’s inability to decisively break key levels.
CPI and Fed Meeting can be crucial
Next week’s Consumer Price Index (CPI) data is expected to show a year-on-year increase of 2.7%. An inflation rate above expectations could strengthen US dollar and government bond yields, putting further downward pressure on gold. However, a softer reading could fuel optimism about further rate cuts, potentially pushing gold higher. With the Fed meeting also scheduled, these events are likely to lead to significant volatility.
Market forecast: Downside risks prevail
Bearish sentiment continues to dominate as gold trades just above critical support. A sustained break below $2,631.04 could initiate a move towards $2,571.68, with deeper declines possible. However, softening surprises in the CPI report or Fed commentary could provide a reprieve, pushing prices back toward $2,663.51 and higher. Traders should prepare for increased market activity as these key catalysts unfold.
More information in our Economic Calendar.