Gold prices edged higher and held around $4,210 per troy ounce in early Asian trading on Thursday morning. This increase occurred amid sentiment that the Federal Reserve (The Fed) is likely to cut interest rates at its meeting next week. Although the increase was not significant, gold's ability to hold above the $4,200 level indicates that buying interest remains strong.
The main trigger for gold's rally came from weaker-than-expected US private sector employment data. The ADP report showed that US private payrolls fell by 32,000 in November, reversing from the 47,000 increase in the previous month and far below market expectations of growth of around 5,000. This data adds to evidence that the US labor market is losing steam, putting pressure on the US dollar and supporting dollar-priced commodities like gold.
The market is now increasingly aggressively placing bets on a Fed rate cut. According to the CME FedWatch Tool, market participants see an almost 89% chance that the Fed will cut interest rates by 25 basis points at its December meeting, up sharply from around 71% a week ago. If interest rates fall, the opportunity cost of holding gold—which does not yield interest—will be lower, making the precious metal more attractive to investors.
In the short term, market participants will focus on the release of US weekly Initial Jobless Claims data, due out Thursday evening Indonesian time. This data will provide additional clues as to whether the weakness in the US labor market is temporary or beginning to develop into a deeper trend. If jobless claims rise higher than expected, sentiment for a rate cut could strengthen, giving gold room to maintain or even extend its gains.
After that, attention will shift to the delayed release of US PCE inflation data, scheduled for Friday. PCE is the Fed's favorite inflation indicator. If PCE data shows inflation is still too hot, the dollar could strengthen and put pressure on gold, as the market will perceive the Fed as being less aggressive in cutting interest rates. Conversely, if inflation appears benign, the combination of weak employment and easing price pressures could act as a "double-dip fuel" for gold to attempt to test higher levels above $4,200. (asd)
Source: Newsmaker.id
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