KEY POINTS

• Gold fell 0.4 per cent on Friday as stronger US employment figures reinforced expectations of tighter monetary policy.
• Bullion traded around $4,070 an ounce, with investors awaiting US inflation data for clues on the Federal Reserve’s next interest rate decision.
• The precious metal remains about 20 per cent below its level before the US-Iran conflict erupted in late February.
• A stronger US dollar is also limiting gold’s recovery despite continued safe-haven demand.

MAIN STORY

Gold prices extended their late-week decline as stronger US employment data strengthened expectations that the Federal Reserve could raise interest rates to contain persistent inflation.

Bullion traded around $4,070 an ounce after losing 0.4 per cent on Friday, as October employment figures showed a sharp increase in job growth and a slight decline in the unemployment rate.

Separate data also showed that US consumer sentiment rose in early November to its highest level in three months, reinforcing signs of resilience in the world’s largest economy.

The stronger economic figures could give the Federal Reserve more room to maintain or tighten monetary policy, particularly as elevated energy prices continue to put pressure on inflation.

Fed officials are expected to receive another employment report and a full set of inflation data before their next meeting in December.

Higher interest rates generally weigh on gold because the metal does not generate interest income, making interest-bearing assets more attractive to investors.

THE ISSUES

Gold’s latest decline comes after the metal recovered above the $4,000-an-ounce threshold following the US midterm elections.

The recovery was supported by falling US Treasury yields and oil prices, amid expectations that incoming Democratic lawmakers would push to end the conflict with Iran and that a divided government would constrain further government spending and borrowing.

However, the recovery has not reversed the broader losses recorded since the US-Iran conflict began in late February. Gold remains about a fifth below its level before the conflict.

The competing pressures on the metal were highlighted by Hebe Chen, market analyst at Vantage Global Prime, who said its safe-haven appeal remained intact but the strength of the US dollar continued to limit further gains.

Sold slipped 0.1 per cent to $4,065.58 an ounce as of 7:35 a.m. in Singapore, while silver fell 0.2 per cent to $51.81 an ounce. Platinum and palladium edged higher.

The Bloomberg Dollar Spot Index, which tracks the US currency against a basket of major currencies, rose 0.4 per cent in the previous session, adding pressure to dollar-priced bullion.

WHAT’S NEXT

Investors are turning their attention to US consumer price index (CPI) data due on Tuesday for further indications of the direction of inflation and the Federal Reserve’s interest rate policy.

The figures could influence expectations ahead of the Fed’s December meeting, particularly as policymakers assess whether persistent energy costs require tighter monetary conditions.

BOTTOM LINE

Gold is facing pressure from stronger US economic data and a firmer dollar, even as geopolitical uncertainty supports its appeal as a safe-haven asset. The next US inflation report will be important in determining whether expectations of higher interest rates strengthen further or ease.

Source: Bloomberg