Gold prices experienced a slight decline as market participants adjusted their expectations regarding potential interest rate cuts by the Federal Reserve. Following stronger-than-anticipated employment figures in the US, the price of gold was trading around US$2,643 an ounce, just shy of its recent peak of US$2,685.58, which was achieved last month.

The unexpected strength in the US jobs data has led to increased confidence among traders, with many now anticipating that any rate reduction in November will be less than initially expected. Currently, money markets are pricing in only a minimal decrease of less than a quarter-point next month. Typically, lower interest rates benefit non-yielding assets like gold, making this week's upcoming inflation data crucial for further insights into the Fed's future rate decisions.

This year, gold has rallied approximately 28%, reaching multiple record highs, driven by expectations of interest rate cuts and robust purchases from central banks, alongside safe-haven demand amid ongoing geopolitical tensions in Ukraine and the Middle East. However, data from the Commodity Futures Trading Commission indicated that money managers reduced their net-bullish positions on gold to a three-week low as of October 1, highlighting a more cautious market sentiment.

Profit-taking was evident as traders began selling off both gold and silver after their recent price increases, with the head of commodity strategy at Saxo Bank noting the slowdown in momentum for these metals. Spot gold fell by 0.4% to US$2,642.88 an ounce in New York, as the Bloomberg Dollar Spot Index remained steady and the yield on US 10-year Treasuries increased. Meanwhile, palladium prices rose, while platinum and silver experienced declines.

As the market prepares for more Fed commentary and the forthcoming US inflation data, investors will be closely watching for any indications that could influence the outlook for gold and other precious metals in the near future.

Bloomberg