Summary

  • International gold prices extended their decline as a strong U.S. labor market reinforced expectations for further Fed rate hikes.
  • Stronger October U.S. job growth and a rise in the consumer sentiment index increased the odds of further monetary tightening, which could reduce the appeal of non-yielding gold during a period of rising interest rates.
  • The direction of gold prices will hinge on the U.S. consumer price index (CPI) due on Nov. 10, which will test whether safe-haven demand can overcome the drag from dollar strength on gold.

Forecast Trend Report by Period

Gold extended its decline as strength in the U.S. labor market bolstered expectations for further Federal Reserve interest-rate increases.

Bloomberg reported on Nov. 8 that spot gold traded at around $4,070 an ounce. Bullion fell 0.4% on Nov. 6, then slipped another 0.1% to $4,065.58 an ounce as of 7:35 a.m. Singapore time on Nov. 9.

The move followed stronger-than-expected U.S. employment data for October, which increased the likelihood of further monetary tightening. Nonfarm payrolls rose by 165,000, beating market forecasts, while the unemployment rate edged lower. Consumer sentiment in early November also climbed to its highest level in three months.

Markets are focused on whether the Fed will raise its benchmark rate at the December Federal Open Market Committee meeting. Persistent inflation pressure tied to high energy prices, along with solid employment data, is supporting the case for tighter policy. Because gold does not pay interest, it tends to become less attractive when rates rise.

Gold had earlier recovered the $4,000-an-ounce level after the U.S. midterm elections. Safe-haven demand increased as U.S. Treasury yields and crude prices fell on expectations that Democratic control of Congress would raise hopes for an end to the Iran war and limit additional fiscal spending. Even so, gold remains down about 20% since clashes between the U.S. and Iran began in late February.

Hebe Chen, a market analyst at Vantage Global Prime, said safe-haven demand and dollar strength are pulling the gold market in opposite directions. Gold has kept its safe-haven status, but the stronger dollar is limiting further gains.

The next key variable for gold is the U.S. consumer price index due on Nov. 10. Chen said the inflation data will test whether safe-haven demand can overcome the restraint that dollar strength has placed on gold prices.

At the same time, spot silver fell 0.2% to $51.81 an ounce. Platinum and palladium edged higher. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against major peers, rose 0.4% in the previous session.

Suehyeon Lee