Gold prices retreat from near record high as mixed US jobs data blurs US Fed rate cut hopes

Gold rate today: After inching close to the record high of $2,531 per ounce, gold prices witnessed sharp selling last week and ended below the psychological $2,500 per ounce mark. COMEX gold price finished at $2,526 per troy ounce, whereas spot gold price ended at $2,497 per ounce. On the Multi Commodity Exchange (MCX), gold rates for the October 2024 futures contract ended at ₹71,460 per 10 gm mark on Friday.

According to commodity market experts, the mixed set of US job data released last week has cast doubt on the US Fed rate cut hopes, dragging the gold price worldwide. However, they said that a US Fed rate cut would enable the US central bank to keep the US job market balanced and suggested that US Fed Chairman Jerome Powell stick with the rate cut decision in the upcoming US Fed meeting.

Why has gold price retreated from near record high?

Speaking on the reason for profit-booking in gold at a record high, Sugandha Sachdeva, Founder of SS WealthStreet, said, "Gold prices retreated from near-record highs in the international market toward the end of the week following the release of key US payroll data. The report showed that non-farm payrolls rose by 142,000 in August, below the expected 160,000, indicating a slowdown in hiring. Additionally, July's jobs data was significantly revised down to 89,000. Average hourly earnings increased by 0.4% MoM, higher than last month's 0.3% rise, while the unemployment rate fell to 4.2% compared to 4.3% in the previous month. The mixed jobs report, a critical measure of labour market health, reduced the likelihood of a large 50 bps rate cut by the Fed, strengthening the dollar and pressuring gold prices."

Sugandha Sachdeva of SS WealthStreet said that progress in ceasefire negotiations between Israel and Hamas on the geopolitical front weighed on gold, removing some of the risk premium associated with safe-haven demand. On the upside, the ₹72,300 per 10 gm mark has acted as a critical resistance level for the MCX gold rate over the past three weeks, with a breakthrough signalling potential for further gains.

Dent to US Fed rate cut hopes?

"The mixed set of US job data last week has put doubts among investors over the US Fed rate cut in upcoming US Fed meeting this month. After renewed fear of the US Labour market's slowdown, some markets expect the US Fed to leave the rate cut promise for the next meeting or announce a 25 bps rate cut that the market has already discounted. However, I expect at least a 50 bps rate cut in the fast-approaching US Fed meeting as it would enable the US central bank to keep the US job market balanced," said Anuj Gupta, Head of Commodity & Currency at HDFC Securities.

Echoing with Anuj Gupta's views on the US Fed rate cut, Standard Chartered analyst Suki Cooper said, “We think the Fed is likely to cut more steeply, and that's when we think gold prices will build upside risk, and we'll start to see prices trading towards $2,700 as the year unfolds.”

According to the CME FedWatch tool, traders currently see a 73% chance of a 25-basis-point (bp) reduction by the US central bank this month and a 27% chance of a 50-bp cut.

Gold price outlook

"The anticipated start of the easing cycle in the US could act as a tailwind for gold prices, with support likely around ₹70,900 per 10 gm ($2,470/oz) and ₹70,200 per 10 gm ($2,420/oz) in the coming days, potentially attracting renewed buying interest," said Sugandha Sachdeva.

(With inputs from Reuters)

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