Gold declined after briefly tapping a four-month high on Monday, as worries about recent data showing stronger-than-expected U.S. business conditions and wage growth boosted the dollar and Treasury yields, along with expectations for more aggressive rate-hikes by the Federal Reserve.
Price action
- Gold prices for February delivery GC00, -1.67% GCG23, -1.67% fell $ 28.30, or 1.6%, to settle at $ 1,781.30 per ounce on Comex. It had traded as high as $ 1,822.90 in early dealings, the highest intraday level for a most-active contract since Aug. 10, FactSet data show.
- Silver for March delivery SIH23, -3.61% was off 83 cents, or 3.6%, at $ 22.417 per ounce.
- March palladium PAH23, -1.37% declined by $ 39.80, or 2.1%, to $ 1,861.30 per ounce, while platinum prices for January delivery PLF23, -2.06% fell $ 19.10, or 1.9%, to $ 1,007.50 per ounce.
- Copper prices for March delivery HGG23, -1.58% lost 6 cents, or 1.4%, to $ 3.795 per pound.
Market drivers
The fact that gold turned lower from a key level makes Monday’s reversal “eye-catching as the chart suggests that at least a temporary top may be in for now,” said Fawad Razaqzada, market analyst at City Index and FOREX.com. Gold futures settled above $ 1,800 on Thursday for the first time since mid-August.
Data from the Institute for Supply Management released Monday showed that a barometer of U.S. business conditions at service-sector companies rose to 56.5% in November. Economists polled by The Wall Street Journal had expected a drop to 53.7%.
Following that data, the ICE U.S. Dollar index DXY, +0.69% was up 0.6% at 105.20 and the 10-year Treasury yield climbed more than 8 points to 3.595%, pressuring prices for gold.
Monday’s ISM data followed the November report on nonfarm payrolls, which revealed the creation of 263,000 new jobs, and a rise in hourly pay of 0.6%. Separately, U.S. factory orders rose by a more than expected 1% in October.
“With U.S. data continuing to remain largely positive, some investors are starting to re-question the market pricing of the terminal interest rates in the U.S., currently priced in at just below 5%,” said Razaqzada, in a market update. “If incoming data continues to remain favourable, then inflation is likely to persist longer and that may encourage the Fed to be even more reluctant to pause its hiking early in the first half of 2023.”
Over the past month, gold prices have steadily climbed higher, with the price of the most-active contract topping its 200-day moving average last week for the first time since June.
But Friday’s U.S. jobs data was “a big setback” for the yellow metal, said Craig Erlam, senior market analyst at OANDA. The hotter-than-expected November jobs print, combined with hot wage-growth numbers reinforced the notion that the Federal Reserve still has a long way to go in its quest to suppress inflation, he said.