- Gold recovery stalls as the markets anticipate the US ADP report today.
- Stronger dollar and higher yields continue to cap the gains in gold.
- Traders await US NFP as the data could influence the Fed’s policy path.
Gold futures remain under pressure, digesting the deep pullback from record highs. The markets are preparing for the crucial US jobs data. The front-month contract for gold futures gained nearly 1% on Wednesday from yesterday’s fall of more than 1.5%.
The recent swings highlight several interacting fundamental themes. The US dollar’s demand remains intact with higher real yields, weighing on the non-yielding gold. The Dollar Index (DXY) hit a fresh 3-month top this week above 99.50, continuing the rally from Powell’s comments after the rate cut. The Fed Chair tempered the odds of aggressive Fed easing.
AT Global Markets Chief Market Analyst Nick Twidale said, “Uncertainty is creeping back into markets, which could bring dip-buyers back into gold before year-end.” He further explained that the recent speculations about Fed policy stance and volatility in equities are prompting investors to reevaluate safe-haven assets.
Gold’s upside is also capped by the reports that China’s Finance Ministry reduced the VAT exemption on gold purchases from 13% to 6%. This disappointed the gold investors as the tax imposition could limit the trading activity.
Meanwhile, the safe-haven demand for gold is still visible as the geopolitical uncertainty and risk-off tone in the equities helped the precious metal rebound from the dip. Investors diversified by buying the gold dip, but the major test lies ahead: the upcoming US ADP and NFP data. The metrics are central as the markets missed the last data due to the government shutdown. Since the recent rate cut was mainly attributed to the softening labor market conditions, the following job market figures are key to watch. Gold could benefit from the weaker jobs data, while a solid print could weigh on the gold.
In the context of NFP data release, two near-term scenarios emerge. If NFP misses estimates, the gold could push back above $4,050 to $4,100, driven by renewed hopes of Fed easing and higher safe-haven demand. In an alternate scenario, gold could fall below $3,900 zone amid the dollar’s potential upside continuation.
Institutional buying remains underpinned, limiting the downside for gold. The mining costs and above-ground stocks remain stable on the supply side, offering a floor slowly. However, Fed policy expectations, data flow, and yield dynamics overshadow these factors in the near term.
