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Gold Price Forecast: US Jobs Data to Shape Near-Term Trend

The Federal Reserve concluded earlier this week its first meeting of 2024, voting to maintain its policy settings unchanged. The FOMC also abandoned its tightening bias, but indicated it will not rush to cut borrowing costs. Chairman Powell went a step further by acknowledging that officials may not yet be confident enough to remove restriction at their next gathering.

Although the possibility of a rate cut in March has diminished, the situation could change again if incoming information shows that activity is starting roll over. In the grand scheme of things, a weaker economy could prompt policymakers to reconsider their stance; after all, data dependency has been the guiding principle for the central bank recently.

Given the present state of events, the January U.S. employment report will assume greater importance and carry added weight. That said, Wall Street projections suggest U.S. employers added 180,000 workers last month, though a softer outcome should come as no surprise following a subdued ADP reading and rising jobless claims for the period in question.

If nonfarm payrolls figures prove lackluster and fall well short of expectations, a March rate cut might be back on the table. Under these circumstances, we could observe a sharp retracement in U.S. Treasury yields and the U.S. dollar. This scenario is likely to foster a constructive environment for gold in the near term.

On the other hand, if NFP numbers beat consensus estimates by a wide margin, there’s potential for further reduction of dovish wagers on the Federal Reserve’s monetary policy outlook. In this scenario, bond yields and the greenback could accelerate to the upside, weighing on the precious metals complex. In this context, bullion could find itself in a precarious position in February.

Source: DailyFX