Gold fell after a hot US nonfarm payrolls print added fuel to speculations that the Federal Reserve will seek to raise interest rates to contain inflation.
Bullion slipped as much as 1.5% toward $4,020 an ounce after the report. Traders also weighed diplomatic efforts to end the Middle East conflict against sharp losses in the artificial intelligence trade that have bruised risk appetite.
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Traders have largely priced in a Fed rate hike in December, as stubbornly high energy prices complicate efforts to rein in inflation. Tighter monetary policy is a headwind for gold, which doesn't pay interest.
Photo Credit: Bloomberg
For fast money funds looking into gold over the coming months, rising interest rates, highly uncertain energy prices and volatility around inflation are among factors that “make it difficult to maintain long positions,” analysts at Goldman Sachs Group Inc. wrote in a note, cutting their year-end forecast from $4,650 an ounce to $4,150 an ounce.
For longer-horizon investors looking to bet on the trend of central bank gold accumulation, or for protection against macro policy tail risks, “the current correction in gold prices may offer a more attractive entry point,” the analysts said.
The precious metal jumped nearly 4% on Wednesday on the midterm results, as Treasury yields and oil fell on bets that incoming Democrats would push to end the Iran war, and that a divided government would limit further spending and borrowing.
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Money managers have slashed their bullish gold bets to the lowest since June in the week ending Nov. 3, according to the latest Commodity Futures Trading Commission data. They also cut bullish wagers in silver to the lowest in almost three years, the data showed.
Spot gold fell 0.6% to $4,063.47 an ounce as of 4:17 p.m. in New York, while silver rose 0.2% to $51.87. Platinum rose and palladium dropped. The Bloomberg Dollar Spot Index, a gauge of the US currency, was 0.4% higher.
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