Gold price eases but clings to weekly gain ahead of jobs report

London (Nov 3)  Gold futures traded in a defensive posture early Friday ahead of a monthly U.S. jobs report that could could help cement already solid expectations for a metals-negative Federal Reserve rate hike next month.

The marquee event on Friday is that report, which is expected to show a sharp rebound in nonfarm payrolls after the hurricane-distorted data from September.

Ahead of the release, December gold GCZ7, -0.21% slipped $2, or less than 0.2%, to $1,276.10 an ounce. Prices posted narrow gains in four out of the last five trading sessions through Thursday’s positive close. The contract is on track to log a roughly 0.2% gain for the week. The exchange-traded SPDR Gold Trust GLD, +0.07%  was little changed in premarket action.

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Gold eased as the dollar rose against all other major currencies, with the ICE Dollar Index DXY, +0.06%  up 0.2% at 94.827.

What’s more, U.S. stocks were shaping up for an upbeat open on Wall Street Friday, with the Dow average headed for a fresh all-time high. Risk-on demand can sour interest in haven gold.

See: Here’s a breakdown of how the new House tax bill impacts your taxes

Back on the jobs front, analysts polled by MarketWatch expect 325,000 new payrolls were added to the U.S. economy in October. That compares with a loss of 33,000 jobs in September, when Hurricane Irma and Hurricane Harvey destroyed large parts of areas along the Texas, Louisiana and Florida coastlines.

“Overall, the forecasts point to an employment report that could seal the deal for a December rate hike, and perhaps bring forth market expectations regarding the timing of the first FOMC rate hike in 2018, something that could cause the dollar to gain,” said Charalambos Pissouros, senior analyst with IronFX Global Ltd.

Higher U.S. rates can boost the dollar and dull demand for dollar-denominated commodities.

Although the Fed has expressed worries about tepid price growth, another rate increase to benchmark interest rates when the U.S. central bank next gathers in December looks almost assured, with Wall Street pricing in a 98% probability of a rate increase next month, according to CME Group data.

Higher rates across the globe can also make gold, which doesn’t bear a yield, comparatively less attractive to investors versus richer yielding assets.

Gold prices settled slightly higher Thursday, buoyed by some weakness in the U.S. dollar as investors weighed the impact of the Bank of England’s first interest-rate increase in a decade, the release of the U.S. tax reform bill and President Donald Trump’s presumed pick to lead the U.S. Federal Reserve.

Investors expect Fed Gov. Jerome Powell to be officially nominated as the next chairman of the Fed. He’s seen as being dovish—favors waiting for more substantial interest-rate tightening until inflation creeps higher.

MarketWatch

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