Gold Hovers at $2,000 Amid Rate Pause Speculation and Lower US Dollar
Gold (XAU) prices remained stable around the crucial $2,000 an ounce mark on Friday, as disappointing U.S. employment figures fueled speculation that the Federal Reserve may halt its interest rate hikes, leading to a decline in the US dollar and bond yields.
The report from the U.S. Labor Department on Friday indicated that nonfarm payroll employment rose by only 150,000 jobs in October, falling short of the anticipated 180,000 gain, with strikes at Detroit's three major automakers partially contributing to the lower numbers. Market participants now estimate a 95% probability of a scenario where the U.S. Federal Reserve maintains current interest rates in December, as indicated by the CME FedWatch tool.
XAU/USD declined in Asian and early European trade on Monday, influenced by a modest increase in U.S. Treasury yields, with investors awaiting Federal Reserve Chair Jerome Powell's upcoming speech for further insights into the trajectory of interest rates. Investor sentiment is also probably being shaped by the perception that the conflict between Israel and Hamas might be limited in scope. Today, traders should focus on the Federal Reserve Board Governor Lisa Cook's speech at 4:00 p.m. UTC. It could potentially cause fluctuations in gold prices.
Euro Climbs 1% Against Weakening US Dollar Amid Rate-Cut Expectations
Euro (EUR) gained as much as 1% on Friday as the US Dollar Index (DXY) declined due to a lower nonfarm payroll (NFP) report.
Investors are increasingly convinced that inflation will further decline, indicating that central banks may need to implement easing measures simply to prevent monetary policy from becoming tighter in practical terms. Features for the Federal Reserve's funds rate suggest an approximately 85% probability that the Fed has finished tightening and an 80% likelihood of rate reductions beginning in June. Market futures indicate an 80% chance that the European Central Bank (ECB) will start reducing rates by April. Speculation about a weakening dollar grows as recent U.S. jobs data and a forecasted fourth-quarter GDP slowdown to 1.2% signal an end to U.S. economic outperformance. While Europe may also face a recession, lower expectations mean the US dollar has more room to fall if economic conditions worsen.
EUR/USD was rising slightly during the Asian and early European sessions. Today, the main focus will be on the data on German industrial orders and Hamburg Commercial Bank (HCOB) Purchasing Managers' Indices (PMIs) from across Europe. In theory, lower-than-expected figures should negatively impact EUR/USD, potentially pulling the pair back below 1.06700. However, the bullish trend in the pair may continue if the figures come out better than expected.