The gold price edged lower on Thursday, but remains well above the key psychological level of $5,000. The nonfarm payrolls report released yesterday came in stronger than expected: the US economy added 130,000 new jobs in January, well above the forecast of 70,000 and the prior reading of 48,000. Investors interpreted the figures as a sign of resilience in the world’s largest economy, weakening the case for near-term monetary stimulus measures.
As a result, expectations that the Federal Reserve will keep interest rates unchanged at its March meeting have risen to 95%, leading to an appreciation of the US dollar against other major currencies.
Traders are now turning their attention to the release of the US inflation data on Friday. An inflation reading above expectations (especially above 2.5%) would confirm the view that monetary easing is not imminent, which would further strengthen the dollar and create additional headwinds for gold. Conversely, a weaker-than-expected CPI report would likely weigh on the greenback and support the precious metal.
Ricardo Evangelista – Senior Analyst, ActivTrades
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