Gold prices hovered around $2,301 an ounce on Friday morning, as traders remained cautious ahead of the critical U.S. non-farm payrolls data release. The precious metal has endured a sharp decline from record highs over the past two weeks, with safe-haven demand drying up and pressure from U.S. interest rates resurfacing.
Spot gold (XAU/USD) traded at $2,301.11 an ounce by 07:40 GMT, down nearly 1% for the week, marking its second consecutive weekly loss. The outlook for gold prices has been dampened by the prospect of U.S. rates remaining elevated for an extended period.
The highly anticipated non-farm payrolls report, due later on Friday, is expected to further influence the Federal Reserve’s interest rate trajectory. Any persistent signs of strength in the labor market data could provide the central bank with more leeway to maintain high rates for longer, a scenario that bodes poorly for gold.
The Fed recently warned that high-interest rates were likely to persist in the near term, with persistent inflation also giving policymakers little reason to lower borrowing costs. However, the central bank signalled that it did not intend to raise rates further.
Nevertheless, the prospect of high rates lingering for an extended period increases the opportunity cost of investing in non-yielding assets like gold. As geopolitical tensions in the Middle East eased, safe-haven demand for the yellow metal evaporated, leaving it vulnerable to fluctuations caused by interest rate movements.
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