Gold holds above $4,320 on US jobs data

Today’s headlines

What’s happening: Gold prices rose this morning as investors turned to safe havens following the latest jobs report from the US.

What happened: The US reported data for October and November, as the report had been delayed due to the prolonged federal shutdown.

Job losses in October and a surge in November’s unemployment rate sent the US dollar lower, lending support to gold.

Why it matters: Markets grew concerned after the Bureau of Labor Statistics reported that the US economy lost 105,000 jobs in October. Data also showed that the US added 64,000 jobs in November, higher than market estimates of 50,000.

However, this was not enough to contain the unemployment rate, which rose to 4.6%, higher than market estimates of 4.4%. This also marked the highest reading since September 2021.

Average hourly earnings rose 0.1% to $36.86 in November, easing from 0.4% growth in October and missing market estimates of 0.3%. This was the smallest increase in wages since August 2023.

Meanwhile, retail sales came in flat for November, due to declines at auto dealers and gasoline stations, while spending remained firmer across various other categories.

Although the Fed cut its benchmark interest rate by 25 bps last week, the reports triggered speculations of two cuts of 25 bps each next year. Non-yielding gold generally sees higher demand in a low-rate environment.

Although optimism around progress in peace talks between Russia and Ukraine briefly weighed on gold prices earlier in the session on Tuesday, geopolitical uncertainty and persistent purchases of the yellow metal by central banks lent support.

Weakness in the US dollar provided a further boost to gold prices, as a softer greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, dipped to a two-month low on Tuesday.

Spot gold rose 0.2% on Tuesday, extending gains this morning, surging around 0.4% to $4,320.99 an ounce.

In other metals trading, spot silver prices rose 2.8% to $65.5475 an ounce this morning, platinum prices gained 2.6% to $1,892.45 and palladium added 0.1% to reach $1,601.80.

What to watch: Investors await the release of economic data on November’s consumer price index from the US, scheduled for release on Thursday. The annual inflation rate in the US surged to 3% in September, reaching the highest reading since January.

The markets today

The Japanese yen in focus today ahead of the BoJ’s rate decision

Context: The USD/JPY gained this morning, despite strong economic data from Japan, as the US dollar recovered after its steep decline on Tuesday.

Details: Data released this morning showed that Japan had a trade surplus of ¥322.2 billion in November versus a deficit of ¥120.8 billion in the same month last year. The figure easily topped market estimates of a surplus of ¥71.2 billion and marked the first surplus since June.

Japan’s exports climbed 6.1% year-over-year to ¥9,714.7 billion in November, while imports rose 1.3% year-over-year to ¥9,392.4 billion.

Japan’s core machinery orders rose 7% to ¥992.9 billion in October, following 4.2% growth in September. The data was much better than market estimates of a 2.3% decline. The latest reading was also the highest since March.

The US dollar came under pressure on Tuesday, after the latest jobs report sparked speculations of interest rate cuts by the Fed next year. The greenback recovered this morning, and its strength weighed on the Japanese currency. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.2% to 98.30.

The USD/JPY forex pair rose around 0.2% to 154.96 this morning, while the Nikkei 225 surged 0.35% to 49,553.71.

What to watch: Data on inflation rate and the Bank of Japan’s interest rate decision, due this Friday, will remain in focus. Japan’s annual inflation rate, which rose to 3.0% in October from 2.9% in the previous month, is expected to ease to 2.9% in November. The Bank of Japan is expected to hike its benchmark short-term rate to 0.75% at its latest meeting.

Other Markets: US trading indices closed mixed on Tuesday, with the Dow Jones index and S&P 500 down by 0.62% and 0.24%, respectively, and the Nasdaq 100 up by 0.26%.

The news shaping the markets

Ukraine’s President Volodymyr Zelenskyy disclosed that a set of peace proposals for ending the ongoing war with Russia could be finalised within days. The news sent the USD/RUB pair higher in forex trading this morning.

Australia’s Westpac–Melbourne Institute Leading Economic Index came in flat in November, compared to a 0.1% rise in October, which exerted pressure on the AUD/USD forex pair.

Singapore’s non-oil domestic exports rose 11.6% year-over-year in November. This being a significant deceleration from the previous month’s 21.7% growth sent the USD/SGD pair higher in forex trading this morning.

New Zealand’s current account deficit widened to NZ$8.37 billion in the third quarter, from NZ$1.30 billion in the previous quarter, which exerted pressure on the NZD/USD forex pair.

India’s total passenger vehicle sales jumped 18.1% year-over-year to 354,969 units in November, following 15.8% growth in the previous month. However, the USD/INR pair rose in forex trading this morning.

What else to watch today

South Africa’s inflation rate (1200 UAE Time), Germany’s Ifo business climate (1300 UAE Time), Ifo current conditions (1300 UAE Time) and Ifo expectations (1300 UAE Time), Eurozone’s inflation rate (1400 UAE Time), labour cost index (1400 UAE Time) and wage growth (1400 UAE Time), UK’s CBI industrial trends orders (1500 UAE Time), US MBA mortgage applications (1600 UAE Time), Canada’s foreign securities purchases (1730 UAE Time), as well as US EIA crude oil stocks change (1930 UAE Time) and EIA gasoline stocks change (1930 UAE Time).