Gold prices have risen for four consecutive days, supported by strong U.S. employment data. Gold traders closely watch employment indicators, which could provide insight into the Federal Reserve’s policy outlook.
Industry sources reported on Monday that spot gold was trading near $2,680 per ounce, increasing more than 1% in the first full trading week of the year. Analysts attribute this surge in gold prices primarily to strong U.S. employment indicators and investors’ preference for safe-haven assets.
On Friday, the U.S. Department of Labor announced that non-agricultural jobs increased by 256,000 in December last year compared to the previous month. This figure exceeds both November’s increase of 227,000 jobs and the consensus forecast of 155,000, indicating the continued resilience of the U.S. labor market. During the same period, the unemployment rate fell to 4.1%.
Despite the robust employment indicators, the Federal Reserve has signaled its intention to maintain interest rates at current levels for an extended period. That means it would only consider rate cuts if inflation shows a clear downward trend. Traders, in particular, see a low probability of a rate cut in the first half of this year. Consequently, even as the dollar strengthened and 10-year U.S. Treasury yields surged, gold strengthened as an inflation hedge asset.
Inflation concerns stemming from the tariff policies and fiscal reforms proposed by President-elect Donald Trump, who takes office on January 20, have also contributed to the rise in gold prices. With growing political and economic uncertainties ahead of Trump’s second term, investor sentiment towards gold as a safe-haven asset has strengthened, driving higher prices.
Kaynat Chainwala, an analyst at Kotak Securities, observed that gold prices are rallying despite rising global yields. She explained that investors are buying gold due to concerns about inflation and geopolitical risks.
Last year, gold prices surged by 27%, outperforming other major commodities; this was driven by the Fed’s interest rate cuts, increased gold reserves by central banks, and heightened geopolitical tensions.
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