Commodity Market: Gold heads for third straight weekly gain ahead of US Non-Farm Payrolls report

Spot Gold edged up on Friday and looked set to register a third consecutive week of advance ahead of the keenly anticipated US Non-Farm Payrolls data due out at 13:30 GMT.

Employers in all sectors of the US economy, excluding farming, probably added 200,000 job positions in December, according to market consensus, following a job growth of 263,000 in November.

The rate of unemployment probably remained steady at 3.7% in December.

“Higher-than-expected job gains and more persistent wage pressures may be catalysts to add pressure on gold,” IG Market strategist Yeap Jun Rong was quoted as saying by Reuters.

“Gold prices have been finding its way higher since November as bullish bets in dollar and yields unwind. For 2023, gold prices may continue to draw in buyers but it might face some risk from hawkish pushback from policymakers.”

Private payrolls rose at a faster pace than expected in December, an ADP report showed yesterday, while the number of Americans who filed for unemployment assistance for the first time decreased to a three-month low last week, according to the latest Labor Department data.

Those data prints hinted at continuing labor market tightness, which could prompt Federal Reserve policy makers to raise interest rates further.

Federal Reserve President for Atlanta Raphael Bostic said yesterday that central bank officials remained determined to bring persistently high inflation back to Fed’s 2% objective.

“I appreciate recent reports that include signs of moderating price pressures, but there is still much work to do,” Fed’s Bostic said.

St. Louis Fed President James Bullard said on Thursday that 2023 could bring some relief on the inflation front and the risk of a US recession had decreased in recent weeks.

The FOMC “has taken aggressive action during 2022, with ongoing increases in the policy rate planned for 2023, and this has returned inflation expectations to a level consistent with the Fed’s 2% inflation target,” Bullard said.

“During 2023, actual inflation will likely follow inflation expectations to a lower level as the real economy normalizes,” he said in material prepared for a presentation ahead of a meeting held by the CFA Society St. Louis.

Despite Gold’s role as an inflation hedge, rising interest rates tend to weigh on the metal’s appeal, as they are associated with a higher opportunity cost of holding Gold, which does not pay any interest.

As of 8:52 GMT on Friday Spot Gold was edging up 0.26% to trade at $1,837.40 per troy ounce. Earlier this week, the precious metal went up as high as $1,865.21 per troy ounce, which has been its strongest price level since June 13th 2022 ($1,879.13 per troy ounce).

Gold has advanced 0.77% so far this week, following another 1.41% gain in the previous week.

Gold futures for delivery in February were inching up 0.08% on the day to trade at $1,842.10 per troy ounce, while Silver futures for delivery in March were up 0.52% to trade at $23.545 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.22% to 105.377 on Friday. Earlier in the session, the DXY went up as high as 105.509, which has been its strongest level since December 7th (105.822).