Gold Set for Weekly Decline as Rate-Cut Prospects Dwindle

(Bloomberg) — Gold 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.

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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.

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