Gold Price Forecast: XAU/USD holds gains above $4,200 as weak US payrolls fuel rate cut bets

NEW YORK (December 3) Gold price (XAU/USD) posts modest gains near $4,210 during the early Asian trading hours on Thursday. The precious metal edges higher amid growing expectations of a US interest rate cut next week. Traders will keep an eye on the release of the US weekly Initial Jobless Claims data, which is scheduled for release later on Thursday.

US private payrolls fell by 32,000 jobs in November, according to Automatic Data Processing (ADP) on Wednesday. This reading followed the 47,000 increase (revised from 42,000), weaker than the market expectation of a 5,000 growth. This report pointed to a weakening US labor market, which weighs on the Greenback and provides some support to the USD-denominated commodity price. 

Traders increase their bets that the US Federal Reserve (Fed) will deliver a 25 basis points (bps) rate cut at the December policy meeting. Fed funds futures traders are now pricing in nearly an 89% chance of a rate reduction next week, up from 71% probability a week ago, according to the CME FedWatch Tool. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

The US weekly Initial Jobless Claims data will be in the spotlight on Thursday. The attention will shift to the delayed US September Personal Consumption Expenditures (PCE) inflation data later on Friday. The Fed’s preferred inflation gauge report could offer some hints about the US interest rate path. Any signs of hotter inflation in the US economy could lift the USD and undermine the yellow metal in the near term. 

FXStreet