Gold under pressure from firmer dollar, Treasury yields

Gold prices slipped on Friday and were on track for their first weekly fall in four, weighed down by a stronger dollar and higher bond yields, while investors keenly awaited US non-farm payrolls data due later in the day.

Spot gold was down 0.3% to $2,037.10 per ounce as of 1006 GMT. US gold futures fell 0.3% to $2,044.50.

“Gold is currently trading down less than 1% for the week as stronger than expected US economic data drove bond yields up and US rate cut expectations down,” said Ole Hansen, Saxo Bank’s head of commodity strategy.

“A stronger-than expected US (payrolls) report may challenge gold’s resolve given its potential further dampening impact on future rate cut expectations.”

Data on Thursday showed that US private employers hired more workers than expected in December, pointing to persistent strength in the labour market.

Benchmark US 10-year Treasury yields hit a three-week peak, while the dollar rose 0.3% and was heading for its biggest weekly gain since May, making gold more expensive for other currency holders.

Focus now shifts to the non-farm payrolls report due at 1330 GMT for more clarity on the Federal Reserve’s rate path outlook. Economists polled by Reuters forecast that 170,000 jobs were created in December, fewer than the 199,000 in November.

Traders are now pricing in about a 63% chance of a rate cut from the Fed at its March 20 policy meeting, compared with a 90% chance a week ago, according to the CME FedWatch tool.

Elsewhere, spot silver was down 0.2% to $22.95 per ounce, while platinum slipped about 1% to $948.15.

Palladium fell 1.1% to $1,025.36 per ounce in its ninth consecutive session of decline. “A combination of healthy availability of inventory, growing short positions, declining market share of internal combustion engines and palladium substitution have weighed on prices, and we expect these trends to set the tone of trading in 2024,” said Standard Chartered analyst Suki Cooper.