The price of gold jumped by about 0.7% after falling by 1.48% yesterday amid increased uncertainty about the timing of the Fed's monetary policy easing, as well as the strengthening of the US currency.
The minutes of the Fed's December meeting, presented the day before, showed that participants had noted “an unusually elevated degree of uncertainty” about the outlook on rate cuts, with further interest rate increases still possible. According to the CME FedWatch Tool, markets see a 66.5% probability of a 25 basis point rate cut at the Fed meeting in March 2024 (down from 72.8% a week earlier) and a 95.8% probability of a rate cut in May 2024 (compared to 99.6% a week earlier). Lower interest rates decrease the opportunity cost of holding non-yielding gold.
Today's price recovery is due to the negative dynamics of the US dollar, partial profit-taking, as well as a correction of positions ahead of the publication of important US data.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.30% to 102.20.
As for the data, investors' attention will be focused on labor market statistics. JOLTs job openings figures for November are out today, followed by ADP's December private payrolls report on Thursday and nonfarm payroll data on Friday. Experts expect that in December the nonfarm payroll increased by 168 thousand. This will represent a slight slowdown compared to November (+199 thousand), but will be in line with the trend decline, albeit a bumpy one, in payrolls that has been in place since mid-2022. Meanwhile, the unemployment rate is projected to rise to 3.8% from 3.7%. If the data points to further weakening of the economy, this may affect expectations regarding the timing of the Fed's interest rate cut.