Veriton Investment

Gold Set for Weekly Decline as Rate-Cut Prospects Dwindle

(Bloomberg) — Gold (GC=F) stayed on track for a weekly decline, after a mixed US jobs report tempered hopes for an interest rate cut in December.

Bullion fell to just above $4,050 an ounce, down 0.7% for the week. The last labor report that the Federal Reserve will see before its Dec. 9-10 meeting showed that US jobs growth beat expectations in September although unemployment marched higher.

Most Read from Bloomberg

India’s Richest Family Powers Push for Green Space in Mumbai

Where Train Dreams Meet Reality in Texas

On the French Riviera, Street Reforms Come From the Right

Baltimore’s Rebooted Transit Project Can’t Come Soon Enough

Chicago’s ‘Job Killer’ Corporate Tax Plan Rejected by Committee

The jobs report has “something for everyone, with both hawks and doves able to move back into their corners,” TD Securities analysts including Oscar Munoz said in a note.

The minutes of the Federal Open Market Committee’s last meeting in October, released on Wednesday, showed many Fed officials are leaning toward keeping interest rates steady. Swap traders see only a 40% chance of a reduction next month, having backed a quarter-point cut just two weeks ago. Bullion typically underperforms when rates are higher.

Despite its pullback from a record high last month, gold has gained 55% this year and remains on course for its best annual performance since 1979. A scorching rally has been supported by inflows to exchange-traded funds, and central-bank purchases. But the latest gains, driven by the so-called debasement trade, or a retreat from sovereign debt and currencies, may have become overstretched.

“The latest debasement trade is based on hopes rather than reality,” said Carsten Menke, head of next-generation research at Julius Baer Group Ltd. While the phenomenon remains a long-term driver of gold as fiscal concerns mount among G-7 countries, some corrections and consolidation are warranted, he said.

Traders are also watching geopolitical developments after Ukrainian President Volodymyr Zelenskiy agreed to work on a peace plan drafted by the US and Russia.

Gold fell 0.5% to $4,056.28 an ounce at 1:25 p.m. in Singapore. The Bloomberg Dollar Spot Index edged lower. Silver declined more than 1%, while platinum and palladium were also lower.

—With assistance from Preeti Soni.