On Monday (January 13), the price of spot gold plummeted, closing at $2,662.58 per ounce, a daily decline of 1%, down by $27.13. The pullback in gold prices was mainly influenced by the surge in U.S. Treasury yields, the strengthening of the U.S. dollar, and profit-taking by investors. Additionally, positive ceasefire signals from the Middle East also pressured gold prices.
The yield on the U.S. 10-year Treasury rose 7.5 basis points on Monday to 4.767%, hitting a high not seen since November 2023. Meanwhile, the U.S. dollar index broke through 110.00, peaking at 110.17, before retreating slightly to 109.85, with an increase of 0.20%. A stronger dollar makes gold, priced in dollars, more expensive for non-dollar buyers, reducing its appeal.
Strong Employment Data Adjusts Market's Fed Rate Cut Expectations
The U.S. non-farm payroll report released last Friday showed an increase of 256,000 jobs in December, far exceeding the expected 160,000, marking the largest gain in nearly nine months. Meanwhile, the unemployment rate in December fell to 4.1%, below the expected 4.2%. The robust employment data underscores the resilience of the U.S. economy, lowering the market's expectations for a Fed rate cut, which also pressured gold.
A New York Fed survey indicated that the market expects the Fed's rate cut this year to be less than 25 basis points. This high-interest rate environment further diminishes gold's appeal as a safe-haven asset.
Positive Progress in Middle East Ceasefire Talks
The gold market's decline was also influenced by news of progress in Middle East ceasefire talks. White House National Security Advisor Sullivan stated that a Gaza ceasefire could be achieved as early as this week. He revealed that U.S. Middle East envoy McGurk had been engaged in intensive talks in the region with the Qatari Prime Minister and Israeli officials, making breakthrough progress. It is reported that mediators have submitted a draft "final agreement" for ceasefire and hostage release to Israel and Hamas.
Reports say the current ceasefire talks are taking place in Doha, involving both the current President Biden's team and the incoming Trump team, aiming to reach an agreement before the U.S. government transition on January 20. Sullivan stated, "The opportunity is at hand; the key is whether we can seize it."
Crucial Data This Week to Determine Trends
Investors are closely watching the upcoming release of U.S. inflation data, initial jobless claims, and retail sales reports this week. This data will further reveal the Fed's policy direction and have a significant impact on gold market trends.
Analysts point out that although gold has recently retraced under pressure, its medium to long-term outlook still depends on geopolitical developments and the global economic situation. In the short term, investors need to pay close attention to movements in the U.S. dollar and Treasury yields to formulate trading strategies.
