Gold prices steadied on Friday, October 2, but remained on track for a second consecutive weekly decline. The US employment report, set to be released later in the day, is expected to test investors' appetite for the metal. At 7:25 am Nigerian time, spot gold stood at $4,188.28 per troy ounce, leaving prices more than 2% lower for the week.
The stronger dollar and elevated US Treasury yields have hindered gold's recovery. According to Simon-Peter Massabni, an analyst at XS.com, these factors are significant obstacles to gold's growth, despite the support that moderating inflation could provide. As gold does not pay interest, investors holding it earn no regular payment, unlike bondholders who receive interest.
The World Gold Council identifies competition from income-producing assets as a crucial influence on gold demand. This competition explains why bullion can struggle even during times of political and economic uncertainty. Nigerian investors also face a currency calculation, as a fall in gold's dollar price does not necessarily translate to an equivalent decline in its naira value.
Economists surveyed by Reuters forecast 90,000 additional US jobs in September, compared to August's initially reported 162,000 increase. They expect unemployment to remain at 4.1% and annual wage growth to reach 3.2%. Revisions to August's employment count will also attract attention, as economists expect the figure to be revised lower.
The release of the US employment figures could change expectations for interest rates and the returns available from assets competing with gold. Stronger hiring and wages could reinforce the case for higher interest rates, potentially weighing on gold. Weaker figures could ease that pressure, although no single number determines the Federal Reserve's decision.
Gold traded at $4,188.28 an ounce on Friday morning, with investors awaiting the US jobs figures scheduled for 1:30 pm Nigerian time. The morning stabilization did little to repair the week's losses. The World Gold Council's research shows how currency movements can produce different gold returns across markets.
The US employment report will be a significant test for gold's ability to retain any recovery. Gold's performance will depend partly on how the jobs figures change expectations for the interest investors can earn elsewhere. The report's impact will be closely watched by investors, as it could influence the Federal Reserve's decision on interest rates.
Key points
- Gold prices are set for a second consecutive weekly decline.
- The US employment report could change expectations for interest rates and gold's performance.
- Stronger hiring and wages could weigh on gold, while weaker figures could ease pressure.
