Gold is poised to mark its first weekly decline in a month on Friday, as the U.S. dollar gains support from fading expectations of an early interest rate cut. Investors are eagerly awaiting a key employment report later in the day to glean further insights into the future of interest rates.
The dollar index is on track to register its best weekly performance since July 2023, making the precious metal more expensive for holders of other currencies. The shift reflects the ongoing strength in the U.S. labour market, evidenced by Thursday's data revealing a larger-than-expected decline in new jobless claims and increased private sector hiring in December.
Minutes from the Federal Reserve's meeting held on December 12 and 13 indicate a growing sense among policymakers that inflation is under control. However, there remains a high degree of uncertainty regarding expectations for interest rate cuts. This ambiguity has contributed to a cautious approach in the market.
The decline in interest rates diminishes the opportunity cost of holding non-yielding assets like gold. According to the CME Group's FedWatch Tool, which monitors trader bets on interest rate movements, market expectations for a rate cut in March have dropped to 65%, compared to 90% the previous week. This shift reflects a reassessment of the economic landscape.
The dollar index is on track to register its best weekly performance since July 2023, making the precious metal more expensive for holders of other currencies. The shift reflects the ongoing strength in the U.S. labour market, evidenced by Thursday's data revealing a larger-than-expected decline in new jobless claims and increased private sector hiring in December.
Minutes from the Federal Reserve's meeting held on December 12 and 13 indicate a growing sense among policymakers that inflation is under control. However, there remains a high degree of uncertainty regarding expectations for interest rate cuts. This ambiguity has contributed to a cautious approach in the market.
The decline in interest rates diminishes the opportunity cost of holding non-yielding assets like gold. According to the CME Group's FedWatch Tool, which monitors trader bets on interest rate movements, market expectations for a rate cut in March have dropped to 65%, compared to 90% the previous week. This shift reflects a reassessment of the economic landscape.
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