Gold set for small weekly decline as rate-cut prospects dwindle

The minutes of the Federal Open Market Committee’s last meeting in October, released on Wednesday, showed many Fed officials are leaning toward keeping interest rates steady

Gold was on track for a small weekly decline, after a mixed US jobs report offered little fresh incentive for the Federal Reserve to cut interest rates.

Bullion fell to around $4,065 an ounce on Friday, down about 0.5% for the week. The last labor report that the Fed will see before its Dec. 9-10 meeting showed that US job growth beat expectations in September but unemployment marched higher.

The jobs report has “something for everyone, with both hawks and doves able to move back into their corners,” TD Securities analysts including Oscar Munoz said in a note.

The minutes of the Federal Open Market Committee’s last meeting in October, released on Wednesday, showed many Fed officials are leaning toward keeping interest rates steady. Swap traders see only a 40% chance of a reduction next month, having backed a quarter-point cut just two weeks ago. Bullion typically underperforms in a higher rate environment.

Despite its pullback from a record high last month, gold has gained around 55% this year and remains on course for its best annual performance since 1979. A scorching rally has been supported by inflows to exchange-traded funds and central-bank purchases. But the latest bull run was seen as overstretched, driven by the so-called debasement trade, or a retreat from sovereign debt and currencies.

“The latest debasement trade is based on hopes rather than reality,” said Carsten Menke, head of next-generation research at Julius Baer Group Ltd. While the phenomenon remains a long-term driver of gold as fiscal concerns mount among the G-7 countries, some corrections and consolidation are timely, he said.

Gold edged down 0.3% to $4,063.37 an ounce at 9:31 a.m. in Singapore. The Bloomberg Dollar Spot Index was flat. Silver fell, while palladium and platinum rose slightly.