(Kitco Commentary) - Gold futures have demonstrated remarkable strength over three consecutive trading sessions, climbing from Monday's low of $2,624.60 to nearly $2,700 per troy ounce. As of 4:00 PM ET, the benchmark February contract settled at $2,691.70, posting a gain of $11.60 or 0.43%. This price level hasn't been seen since December 13, 2023, and notably, today's advance occurred despite modest dollar strength, with the dollar index rising 0.15% to 109.308.
Market analysts attribute the precious metal's resilience to several factors.
UBS analyst Giovanni Staunovo notes that "safe-haven demand is modestly supporting gold, offsetting downside pressure coming from a stronger dollar and higher rates."
Adding to market dynamics is the uncertainty surrounding President-elect Trump's upcoming inauguration. Sources close to the incoming administration indicate Trump is contemplating declaring a national economic emergency to justify implementing broad-ranging tariffs on both allies and competitors. As Reuters reports, such tariffs could potentially trigger trade wars and inflation when Trump takes office on January 20 – scenarios where gold, traditionally viewed as an inflation hedge, typically performs well.
This political backdrop intersects with recent employment data showing signs of cooling in the labor market. The ADP private sector employment report released yesterday indicated 122,000 new jobs in December, falling short of both November's 146,000 positions and the anticipated 136,000 jobs. This softer reading may foreshadow tomorrow's crucial nonfarm payroll report, where analysts surveyed by Reuters expect 160,000 new jobs for December – a marked decrease from November's 227,000.
Market attention now centers on tomorrow's non-farm payroll jobs report, which, combined with the ADP data, will likely influence the Federal Reserve's upcoming monetary policy decision on January 29.
The central bank is expected to maintain its current benchmark interest rate between 4.25% and 4.50%. The CME's FedWatch tool currently shows a 93.1% probability of rates remaining unchanged at this level, slightly down from 94.7% yesterday and 88.2% a week ago. Looking further ahead, the tool suggests a 57.7% chance of rates holding steady through the March FOMC meeting, up from 49.4% last week.
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