Gold prices flat; slow US jobs data boosts dollar, dampens rate cut expectations

Gold prices experienced a slight dip on January 13, 2025, following a robust U.S. jobs report that reinforced the Federal Reserve's cautious approach towards rate cuts. The report supported the strength of the U.S. dollar, making gold more expensive for foreign buyers.

Strong US jobs report pressures gold prices

Spot gold fell by 0.2 per cent to $2,684.39 per ounce, while U.S. gold futures lost 0.1 per cent, settling at $2,712. The unexpectedly strong U.S. nonfarm payrolls data for December indicated that the U.S. economy remains resilient, reinforcing expectations that the Federal Reserve will not rush into easing policies. The report fueled investor optimism in the dollar, which in turn put pressure on gold prices.

The dollar's rise and the Fed's cautious stance

The rise in the dollar made gold more costly for buyers using other currencies. Additionally, the Federal Reserve's cautious outlook on rate cuts, further bolstered by the U.S. economic resilience narrative, took away some of the appeal from gold. Higher interest rates tend to reduce the attractiveness of non-yielding assets like gold, as investors seek returns elsewhere.

Market expectations for future rate cuts

Traders are now anticipating that the Federal Reserve will hold rates steady during its upcoming meeting in January. Moreover, market participants are only forecasting a single rate cut in 2025, with expectations pointing to June as the most likely month. However, all eyes are now on the upcoming U.S. inflation data, set to be released later this week. Weaker inflation data could potentially reverse the rally in the dollar and Treasuries, giving fresh hope for a rate cut.

Silver and other precious metals also face downward pressure

Silver prices also saw a decline, falling by 0.6 per cent to $30.21 per ounce. Platinum decreased by 0.4 per cent to $960.54, while palladium remained stable at $947.40.

Gold and silver market outlook

Gold’s recent dip reflects the current uncertainty surrounding U.S. economic policies and their potential impacts on the precious metals market. As markets continue to monitor U.S. economic data and Federal Reserve commentary, both gold and silver remain under pressure in the short term.

Current precious metal prices:

• Gold (Feb 5, 2025): Rs 78,700.00, up by Rs 277 (0.35 per cent)

• Silver (Mar 5, 2025): Rs 92,394.00, down by Rs 112 (-0.12 per cent)