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Gold Lingers Near Two-week High as Focus Shifts to Payrolls Data

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
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Gold Lingers Near Two-week High as Focus Shifts to Payrolls Data

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo

Gold prices were flat near a two-week high on Thursday after softer-than-expected US economic data spurred hopes of interest rate cuts as early as September, and the market spotlight is now on Friday's non-farm payrolls data.

Spot gold edged 0.1% higher to $2,358.19 per ounce as of 9:53 a.m. ET (1353 GMT), after prices hit their highest level since June 21 on Wednesday. Most US markets were closed for Independence Day holiday on Thursday.

Bullion prices in the previous session gained more than 1% after a weak services report and ADP employment report on Wednesday depicted a slowing US economy, Reuters reported.

"It appears that there's a strong chance that the rate cuts might occur some time in the end of third quarter or early part of the fourth quarter, which just makes gold a lot more attractive than the alternative (which is) bonds," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Lower rates reduce the opportunity cost of holding non-yielding gold.

Minutes of the Fed's June meeting acknowledged the US economy appeared to be slowing and "price pressures were diminishing".

"Long-term wise, we're seeing the sanctions that the US placed (on Russia) inducing a lot of central banks and other governments to move towards gold specifically to eliminate the counterparty and default risk," Ebkarian added.

The sanctions, announced last month, are aimed at cutting off Russia's access to products and services needed to sustain military production for its war in Ukraine.

Traders are now focused on US nonfarm payrolls data, due on Friday. The market is looking for weaker job creation last month, said Ole Hansen, head of commodity strategy at Saxo Bank.

"Together with an expected easing in wage pressure, the precious metal market is likely to react positively should these numbers be confirmed," Hansen added.

Spot silver fell 0.2% to $30.409 while platinum rose 1.6% to $1,012.50.

Palladium was 0.5% down at $1,024.66, after scaling its highest level since mid-April in the previous session.

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US Job Growth Surges in September, Unemployment Rate Falls to 4.1%

A woman enters a store next to a sign advertising job openings at Times Square in New York City, New York, US, August 6, 2021. REUTERS/Eduardo Munoz/File Photo
A woman enters a store next to a sign advertising job openings at Times Square in New York City, New York, US, August 6, 2021. REUTERS/Eduardo Munoz/File Photo
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US Job Growth Surges in September, Unemployment Rate Falls to 4.1%

A woman enters a store next to a sign advertising job openings at Times Square in New York City, New York, US, August 6, 2021. REUTERS/Eduardo Munoz/File Photo
A woman enters a store next to a sign advertising job openings at Times Square in New York City, New York, US, August 6, 2021. REUTERS/Eduardo Munoz/File Photo

US job growth accelerated in September and the unemployment slipped to 4.1%, further reducing the need for the Federal Reserve to maintain large interest rate cuts at its remaining two meetings this year.
Nonfarm payrolls increased by 254,000 jobs last month after rising by an upwardly revised 159,000 in August, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday.
Economists polled by Reuters had forecast payrolls rising by 140,000 positions after advancing by a previously reported 142,000 in August.
The initial payrolls count for August has typically been revised higher over the past decade. Estimates for September's job gains ranged from 70,000 to 220,000.
The US labor market slowdown is being driven by tepid hiring against the backdrop of increased labor supply stemming mostly from a rise in immigration. Layoffs have remained low, which is underpinning the economy through solid consumer spending.
Average hourly earnings rose 0.4% after gaining 0.5% in August. Wages increased 4% year-on-year after climbing 3.9% in August.
The US unemployment rate dropped from 4.2% in August. It has jumped from 3.4% in April 2023, in part boosted by the 16-24 age cohort and rise in temporary layoffs during the annual automobile plant shutdowns in July.
The US Federal Reserve's policy setting committee kicked off its policy easing cycle with an unusually large half-percentage-point rate cut last month and Fed Chair Jerome Powell emphasized growing concerns over the health of the labor market.
While the labor market has taken a step back, annual benchmark revisions to national accounts data last week showed the economy in a much better shape than previously estimated, with upgrades to growth, income, savings and corporate profits.
This improved economic backdrop was acknowledged by Powell this week when he pushed back against investors' expectations for another half-percentage-point rate cut in November, saying “this is not a committee that feels like it is in a hurry to cut rates quickly.”
The Fed hiked rates by 525 basis points in 2022 and 2023, and delivered its first rate cut since 2020 last month. Its policy rate is currently set in the 4.75%-5.00% band.
Early on Friday, financial markets saw a roughly 71.5% chance of a quarter-point rate reduction in November, CME's FedWatch tool showed. The odds of a 50 basis points cut were around 28.5%.