On Monday (November 4), during the Asian market early session, spot gold experienced slight fluctuations, trading around $2,739.28 per ounce, holding steady at the $2,730 mark. Last Friday, gold prices fell 0.3% to $2,735, mainly due to a stronger dollar and rising US Treasury yields. Additionally, after hitting a historic high of $2,789.95, some long positions took profits. However, due to weak US employment data released last week, the market is betting that the Federal Reserve will cut interest rates this week, limiting gold's decline.
The US dollar index rose 0.41% last week, but sharply retreated at the start of trading on Monday, falling 0.38% to 103.93, providing some support for gold. Analysts noted that the dollar's weakness is mainly affected by weak US employment data and electoral uncertainties, factors that have heightened market attention on the upcoming Federal Reserve meeting.
The Cooling Job Market Fuels Expectations for a Fed Rate Cut
In October, US non-farm employment increased by only 12,000, marking the smallest gain since December 2020, primarily due to hurricanes and Boeing strikes. Although the unemployment rate remains at 4.1%, the overall labor market is cooling, with employment gains in August and September revised down by 112,000. October's job gains came almost entirely from healthcare and government sectors, while manufacturing jobs decreased by 46,000, reflecting weakness in the automotive and manufacturing sectors. Economists expect the Fed to continue considering rate cuts in response to the slowdown in employment, with the market anticipating a 25 basis point cut this week.
US Elections and Global Risk Factors Affect Market Sentiment
Besides Fed policy, Tuesday's US presidential election has also become a global market focus. Currently, Democratic candidate Harris and Republican candidate Trump have close poll support, indicating a tight race. Analysts pointed out that a Trump victory could strengthen the dollar, as his tax reduction and tariff policies tend to benefit the dollar and bond yields. Conversely, a Harris victory might pressure the dollar, with the market generally believing Harris would continue stable policies, having a minimal impact on the economy.
Due to the tight race, market sentiment remains unstable. Traders noted the dollar's decline at the start of trading might have been influenced by a poll showing Harris leading Trump by 3 percentage points in the key state of Iowa, particularly with rising support among female voters, which also increases market volatility.
Uncertain Gold Future, Main Drivers are Fed and Geopolitics
Economists expect the Fed to opt for a conventional 25 basis point rate cut, rather than an aggressive 50 basis point cut. Goldman Sachs predicts the Fed may cut rates four more times in the first half of 2024 to address economic slowdown and inflation pressures. Under the current circumstances, gold may continue to fluctuate in the short term, influenced by both the Fed and US elections. In the coming days, as election results and Fed policies become clearer, gold prices may experience significant volatility, prompting investors to closely monitor market trends and adjust trading strategies accordingly.
