Gold slips as US jobs data raises Fed rate hike expectations

Gold prices fell as much as 1% to slip below $2,000 on Monday, after US employment data pointed to a tight labour market, raising expectations of another rate hike by the Federal Reserve in May.

Spot gold was down 0.8% at $1,992.97 per ounce, as of 6.13am GMT (or 8.13am). US gold futures slipped 0.9% to $2,007.80.

Gold slid due to “profit-booking on expectations of Fed rate hikes followed by Friday’s strong US job growth report and a steady dollar,” Hareesh V, head of commodity research at Geojit Financial Services, said while noting a technical correction in prices.

The dollar index was 0.1% higher, making bullion expensive for overseas buyers.

Friday’s data from the US Labor Department showed non-farm payrolls increased by 236,000 jobs in March, versus expectations of 239,000. The data also showed the unemployment rate dipped to 3.5% from 3.6% in the prior month.

The report raised bets that the US central bank would increase rates next month, with markets pricing in a 63.4% chance of a 25 basis-point (bps) hike, according to the CME FedWatch tool.

But “the short-term outlook remains bullish for gold. As long as prices stay above $1,920, there are chances for the bullish outlook to continue,” said Geojit’s Hareesh.

Gold is traditionally considered a hedge against inflation but higher rates increase the opportunity cost of holding the non-yielding asset.

“The bull trend, established since November 2022, is still intact,” metals firm MKS PAMP said in a note, adding a “stickier” core US CPI on Wednesday would solidify a 25bps hike and ensure that unless there’s a new catalyst, gold prices might not hit all-time highs this month.

Spot silver shed 1% at $24.75 per ounce, platinum lost 0.7% to $1,000.78 and palladium eased 0.1% to $1,464.79.

Australia, Hong Kong and European markets are closed on Monday for the Easter holidays.

Reuters