Gold prices experienced an uptick on Thursday, following their most significant daily increase since mid-August in the prior session. This rise was supported by a depreciating US dollar, as investors looked ahead to this week’s non-farm payrolls report for insights into the Federal Reserve’s policy direction. Spot gold increased by 0.6% to $4,082.76 per ounce by 0036, following a rise of approximately 3.4% on Monday. US gold futures for December delivery increased by 0.5%, reaching a price of $4,092.90.
The dollar experienced a retreat on Wednesday, though it remained above its earlier lows following a decisive victory by Democrats in the US midterm elections. This outcome alleviated a significant source of uncertainty for the market as investors assessed the implications for potential regulatory changes. A depreciating dollar renders gold priced in dollars more accessible to those holding alternative currencies. The ADP National Employment Report indicated that private payrolls in the US experienced continued growth in October. Market participants are currently anticipating the US nonfarm payrolls report on Friday to better assess the Federal Reserve’s monetary policy outlook.
On the geopolitical front, Washington’s hostility toward Tehran will remain unchanged despite partisan shifts or any concessions to the US, and those who hold a contrary belief are “greatly mistaken,” stated Iran’s Supreme Leader Mojtaba Khamenei on Wednesday. Traders currently perceive an 83% probability that the Federal Reserve will increase interest rates in December, as indicated by CME’s FedWatch tool. Elevated interest rates heighten the opportunity cost associated with holding non-yielding bullion, thereby diminishing its attractiveness to investors. Meanwhile, Citi has a 0-3 month price target of $4,500 per ounce for gold, as it sees substantial upside potential if the Strait of Hormuz reopens and the Yemen/Saudi conflict de-escalates by the year-end, as it expects.
Euro zone inflation reached a three-year peak last month, driven by escalating food and energy prices, and is anticipated to increase further in the upcoming months, strengthening the rationale for an additional rate hike by the European Central Bank in December. The Bank of England is anticipated to increase interest rates for the first time in three years on Thursday, driven by escalating inflationary pressures stemming from the US-Iran conflict. Among other metals, spot silver increased by 0.3% to $52.37 per ounce, platinum saw a rise of 0.6% to $1,505.85, while palladium experienced a slight decline of 0.1% to $1,003.83.
