Gold slips as big jump in US jobs dampens bets of US rate cut

Gold prices fell on Monday, as the dollar and treasury yields surged after a blowout US jobs report crushed expectations of near-term interest rate cuts from the Federal Reserve.

Spot gold was down 0.3% at $2,053.50/oz by 4.20am GMT. US gold futures fell 0.2% to $2,049.10/oz.

“Large speculators and managed funds trimmed long exposure to gold futures for a fourth week … and with Jerome Powell reiterating three rate cuts for the year, it remains debatable as to whether gold can rally from here,” said Matt Simpson, a senior analyst at City Index.

Traders are betting on four quarter-point Fed rate cuts for 2024, down from six last Monday, according to LSEG’s interest rate probability app IRPR.

The odds for a cut in May have also lengthened. Lower interest rates boost nonyielding gold’s appeal by decreasing the opportunity cost of holding bullion.

The dollar index hit an eight-week high, making bullion more expensive for other currency holders, while yields on benchmark 10-year treasury notes rose to more than 4%.

Data from the US labour department showed on Friday that non-farm payrolls increased by 353,000 jobs in January, almost double the 180,000 forecast by economists polled by Reuters.

Last week, Fed chair Jerome Powell dismissed the idea of lowering interest rates in the spring, but voiced confidence that inflation would return to the central bank’s 2% target.

“While gold may struggle to hold on to gain, there appears to be no immediate appetite to drive it below $2,000. So, perhaps gold will remain in a choppy range at elevated levels,” said Simpson.

Investors are awaiting remarks from a host of Fed speakers this week for further clues on rate cuts.

Spot silver fell 0.4% to $22.58/oz, palladium dropped 1.2% to $935.56/oz, while platinum rose 0.3% to $893.19.