Gold futures ended lower Thursday for the first time in four sessions, but held ground above the key $1,800 mark, as investors looked to monthly U.S. jobs data at the end of the week to help guide the next move for the metal’s prices.
The U.S. nonfarm payrolls number due Friday is “highly likely to be rotten, but traders need to pay close attention to how equity markets will react to it,” said Naeem Aslam, chief market analyst at AvaTrade. It’s “pretty much a given now that U.S. NFP number isn’t going to be great, hence we may still see a risk-on rally, which could push the gold price lower,” he said.
However, “if equity traders begin to lose confidence, we could see a serious move for the gold price,” he told MarketWatch, implying a rise in prices for the metal.
On Thursday, April gold GCJ22, -0.30% GC00, -0.30% fell by $6.20, or 0.3%, to settle at $1,804.10 an ounce. Prices pulled back after gaining 0.5% on Wednesday, which saw the highest settlement for a most-active contract since Jan. 26, FactSet data show. Bullion had posted gains in each of the past three sessions.
March silver SIH22, -1.42% fell 33 cents, or 1.5%, at $22.375 an ounce, following a 0.5% gain on Wednesday.
Prices for both precious metals extended their declines as the ICE U.S. Dollar index DXY, -0.64% fell but Treasury yields strengthened in the wake of the latest U.S. economic data.
The ISM U.S. service sector activity index fell to a 16-month low of 59.9% in January. The index was forecast to decline to 60%.
While both gold and silver managed gains on Wednesday “in the face of fresh evidence of inflation, the gains were undersized relative to history,” analysts at Zaner wrote in a Thursday note. “Gold and silver are not embracing the inflation potential in the marketplace yet, with a portion of the market still confident in the [Federal Reserve’s] ability to rein in inflation before it begins to spiral upward.”
The U.S. dollar fell after the “surprisingly negative” data on U.S. private-sector jobs on Wednesday, the analysts said, but all eyes now shift to the monthly U.S. nonfarm payroll report that could, if soft, send the dollar sharply lower and give gold and silver a leg up on the charts,” the Zaner analysts said.
Meanwhile, economists at Credit Suisse are forecasting that the yellow precious metal will retest the area of around $1,691 if it breaks under $1,759.
The move in gold came as the Bank of England on Thursday announced its second consecutive interest-rate increase, marking the first time it is completed back-to-back hikes since 2004.
The central bank also said it would stop reinvesting the proceeds of its portfolio of £875 billion in government bonds, but won’t begin selling them until rates have climbed to at least 1%.
That decision came ahead of a policy update from the European Central Bank, where the institution held its policy mix in place but reaffirmed plans to scaling back its bond buying program soon.
Last week, the U.S. Federal Reserve signaled that it could start lifting benchmark interest rates as soon as March and continue to raise rates as it combats inflation pressures.
Precious metals have been mostly stuck in a range, with traders anticipating a regime of higher rates buffeting precious metals. However, uncertainty about the effectiveness of policy makers in tackling inflation and fears of a recession in parts of the world have helped to support bullion buying.
In other metals trading Thursday, March copper HGH22, -0.61% lost 0.6% to $4.471 a pound. April platinum PLJ22, -1.07% declined by 1.3% to $1,030.30 an ounce and March palladium PAH22, -2.36% settled at $2,317.70 an ounce, down 2.2%.