A Delayed Reaction to Jobs Report and Dollar Rally Drive Gold's 1.33% Decline

Gold futures tumbled $36.10 (1.33%) today as the U.S. dollar climbed to its highest level in over two years. The dollar index reached 109.939, advancing 0.19 points and touching an intraday peak of 110.249 – levels not seen since November 2022. Rising treasury yields added further pressure on gold, with the two-year note yielding 4.4% (up 1.2 basis points) and the 10-year note at 4.783% (up 1.4 basis points).

The most active February gold futures contract settled at $2,681.30 as of 5:40 PM ET, after factoring today’s substantial decline of $36.10.

Market sentiment continues to adjust to Friday's robust nonfarm payrolls report, which showed 256,000 new jobs added last month – significantly exceeding Reuters' consensus estimate of 160,000. This strong employment data has dampened expectations for aggressive Federal Reserve rate cuts in 2024, with analysts now projecting only one or two 25-basis-point reductions throughout 2025.

A Saxo Bank analysis noted: "Gold is trading near USD 2,700, maintaining strong demand despite the headwinds of a robust dollar and rising yields. The latter has fueled a growing risk-off sentiment in markets amid concerns over financial stability and heightened volatility ahead of Trump's return to the White House."

The CME's FedWatch tool currently indicates minimal chance for near-term monetary policy shifts. The probability of a rate cut at January's FOMC meeting stands at just 2.7%, while the likelihood of maintaining current rates (4.25-4.5%) through March is 79.9%. The tool further projects a 68.5% probability of continued rate pause in May and a 47.5% chance of unchanged rates through June.

Several crucial economic reports will influence the Federal Reserve's decision-making ahead of its January 29 meeting conclusion:

• CPI Report (December inflation figures): January 15, 8:30 AM EST
• Weekly Jobless Claims: January 16, 8:30 AM EST
• U.S. Census Bureau Retail Sales Report: January 16, 8:30 AM EST

These upcoming data releases will be instrumental in shaping the Fed's monetary policy stance for early 2025.

Wishing you, as always good trading,