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Gold Prices Hold Steady Amid US Labor Data and Rate Cut Speculations

8 December 2023 Written by Stephane Dubois  Senior Market Analyst Stephane Dubois

Gold prices exhibited minimal movement during Asian trading hours on Thursday, as market participants awaited further signals regarding the state of the cooling U.S. labor market. Additionally, investors remained focused on when the Federal Reserve might initiate interest rate reductions. The price of gold seemed to have stabilized within a trading range of $2,020 to $2,050 per ounce after experiencing a brief surge to record levels exceeding $2,100 earlier in the week.

Several factors contributed to the recent rally in gold prices. Initial gains were driven by seemingly dovish statements from Federal Reserve Chair Jerome Powell, fueling expectations of a potential rate cut as early as March 2024.

However, as the week progressed, market sentiment shifted, particularly in light of signs of resilience within the U.S. economy. This led to a moderation in expectations for rate cuts. Additionally, gold benefited from increased demand for safe-haven assets following an attack on U.S. vessels in the Red Sea. Nevertheless, tensions eased in the Middle East, causing geopolitical concerns to wane. As of 00:24 ET (05:24 GMT), spot gold remained steady at $2,026.30 per ounce, while gold futures with a February expiration dipped 0.2% to $2,043.05 per ounce.

Market Focus Turns to Nonfarm Payrolls Data and Fed Rate Cut Speculation

Investors were now directing their attention toward the forthcoming nonfarm payrolls data for November, scheduled for release on Friday, in search of additional insights into the labor market's condition. While earlier data on job openings and payrolls hinted at a cooling labor market, definitive signals were awaited from the nonfarm payrolls report. Furthermore, growing uncertainty persisted regarding the timing of potential interest rate cuts by the Federal Reserve. Although the central bank is widely expected to maintain current rates in the upcoming week, market uncertainty prevailed regarding the commencement of any policy loosening.

Hitherto, Fed officials have displayed limited inclination towards initiating interest rate cuts, with Powell recently reiterating his stance favoring a "higher-for-longer" approach. Nonetheless, traders continued to speculate that further cooling in inflation and labor market conditions might prompt the Fed to adopt a more dovish tone in the months ahead.

Gold is anticipated to benefit from any indications of a less hawkish Fed stance and a cooling labor market. The precious metal has consistently held above the $2,000 level since late November, potentially signaling increased strength in the coming weeks.

Copper Rebounds on Positive Chinese Import Data

In the realm of industrial metals, copper prices exhibited a strong rebound on Thursday, marking a recovery from three consecutive days of losses. This upswing was influenced by data revealing that Chinese imports of the red metal had surged to a two-year high. Copper futures with a March expiration climbed 0.7% to $3.7568 per pound.

Notably, Chinese copper imports for November recorded a 10.1% increase, reaching 550,566 metric tons—the highest level since December 2021. This data suggested that Chinese demand for copper remained robust, even in the face of slowdowns in other facets of the economy.

While China's overall imports unexpectedly contracted in November, its exports experienced growth for the first time in six months. These developments underscored the resilience of copper demand within the world's largest consumer of the metal.

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