Gold Prices Fall as Payroll Data Fuels Expectations for Smaller Rate Cut

Gold prices experienced a slight decline during Asian trading on Monday, continuing to adjust after reaching record highs. The drop was influenced by strong U.S. payroll data, which increased expectations for a smaller interest rate reduction from the Federal Reserve.

As a result of the robust payroll figures, the dollar strengthened along with U.S. Treasury yields, leading traders to reduce their expectations for a significant rate cut from the Fed. This week, market participants will be closely monitoring indications from the Federal Reserve and the U.S. economy, both of which significantly impact interest rate decisions.

Spot gold slipped by 0.2% to $2,647.64 per ounce, while December gold futures decreased slightly to $2,667.10 an ounce.

Gold prices surged to all-time highs in September following the Fed’s decision to cut rates by 50 basis points and signal the beginning of an easing cycle. However, stronger-than-anticipated nonfarm payroll data released on Friday shifted market sentiment towards an expectation of a 25 basis point rate cut in the upcoming November meeting, with traders pricing in over a 90% chance of this outcome.

In addition, market participants are positioning for a higher terminal rate from the Fed, which creates a less favorable environment for metal prices. Following Friday’s data, the value of the dollar surged.

Throughout the week, attention will be directed at remarks from several Fed officials and the minutes from the Fed’s September meeting for additional insights on interest rates. Additionally, consumer price index inflation data scheduled for later in the week is expected to influence the outlook for rates.

Other precious metals also mirrored gold’s downward trend. Platinum futures fell by 0.5% to $997.05 per ounce, while silver futures dropped by 0.1% to $32.360 per ounce.

In the realm of industrial metals, copper prices stabilized on Monday after experiencing significant fluctuations over the past week. Market sentiment remains relatively positive due to expectations of additional stimulus measures from top importer China.

Benchmark copper futures on the London Metal Exchange held steady at $9,972.0 per ton, while one-month copper futures increased by 0.2% to $4.5728 per pound. Initially, copper prices rose following announcements of new stimulus measures from China in late September. However, trading activity decreased during the past week due to the Golden Week holiday in China.

Chinese markets are expected to reopen on Tuesday, and the government is anticipated to hold a briefing on further stimulus initiatives.