Ahead of US Jobs Data Release, Gold Prices Fall as Investors Move into the Dollar

Gold prices fell ahead of the United States’ Non-Farm Payrolls (NFP) data release, despite the metal historically serving as a hedge during periods of economic and geopolitical uncertainty. Spot gold reversed course to trade lower, down 1.2%, to $5,076.59 per ounce, after a session high of $5,194.59 per ounce. Meanwhile, the US gold futures contract for April delivery settled 1.1% lower at $5,078.70 per ounce. Historically, gold has a relatively strong negative correlation with US economic data. When indicators such as the labour market are forecast to strengthen, markets generally price in higher-for-longer US interest rates. “This phenomenon is a market anticipatory move to the Fed’s monetary policy. Historically, gold has a strong negative correlation with US economic data,” said Tim, an Investment Specialist at KISI when contacted by Kompas.com on Friday night. The expectations firmed after ADP Payroll data showed a solid figure around 63,000. That figure served as an early sign that the US labour market remains fairly strong, fueling speculation that NFP data could also show solid results. “When payroll data like NFP is expected to strengthen, supported by solid ADP Payroll figures around 63,000, market expectations for higher-for-longer interest rates rise,” he said. In such a situation, global investors tend to reposition their portfolios ahead of official data releases to mitigate the risk of volatility typically seen when major economic data is announced. The dollar’s strength is usually accompanied by a rise in yields on US government bonds. In these conditions, gold becomes relatively less attractive compared with interest-bearing instruments such as bonds. They view the current gold weakness as more of a temporary technical selling move. Investors are taking pre-emptive positioning, selling portions of their gold holdings ahead of official data to avoid potential market volatility. “This triggers a stronger DXY, which automatically weighs on gold as the commodity becomes more expensive for holders of other currencies. The current decline is more about pre-emptive positioning by investors selling technically ahead of the official data release to avoid volatility risks,” Tim, an Investment Specialist at KISI, said.