Key Takeaways

  • Gold extended its decline on Tuesday for a seventh straight session 
  • All eyes on Friday’s upcoming jobs report – is the US economy cooling down?

Gold’s Lackluster Performance

Gold’s downward trend has now stretched to seven consecutive sessions, seeing its lowest level since early March. As of early Tuesday, the bullion is valued at $1,827, having just touched $1,817, and chasing March’s lowest point of $1,814. 

This is the longest losing streak for the precious metal since August 2022, raising doubts about its “safe-haven” status.

As markets watch the US dollar keep the ball rolling with 10-month highs, gold has moved in the opposite direction. Knowing that the yellow metal is priced in US dollars on the broader market, the strength of the greenback would translate into increased costs of gold for international investors, making it less enticing as an investment.

Gold as a “non-productive, non-yielding” asset, pays no interest or dividends. The Fed’s strong approach to addressing inflation is reducing concerns about a recession. Against this backdrop, investors are increasingly more attracted to the US dollar, while gold loses its shine.

Economic Temperature

As the Fed held interest rates steady at 5.25% – 5.50% last month, as part of their hawkish strategy to battle inflation, Federal Reserve Governor Michelle Bowman said that we could “continue to expect that further rate increases will likely be needed to return inflation to 2% in a timely way”. She added that “further policy tightening” may be needed to reach their goal.

The focus will shift now to Friday’s jobs numbers report, which is an expected modest 163,000, compared to August’s 187,000 increase. The Fed will watch this number closely, as a figure considerably higher than this could signal a potentially overheating economy. In contrast, a lower number may mean the economy is facing sluggish growth. The jobs print will play a crucial role in shaping the Fed’s monetary policy. Should the employment numbers be as expected, the dollar may strengthen even more. 

Traders should keep a watchful eye on this report, as either of these scenarios may introduce volatility to the market.