Gold prices creep higher on hopes of cooling nonfarm payrolls

© Reuters.

By Ambar Warrick

Investing.com -- Gold prices kept to a small range on Friday as markets hunkered down ahead of nonfarm payrolls data that is likely to factor into monetary policy, with the yellow metal also headed for weekly losses as markets priced in higher interest rates.

Still, gold took some relief from data on Thursday that showed U.S. unemployment claims rose more than expected in the past week. The dollar fell from recent highs, while Treasury yields also retreated.

The reading spurred some bets that nonfarm payrolls data due later in the day will show some signs of cooling in February, after topping estimates for 10 consecutive months. Analysts are expecting a sharp drop in payrolls from the prior month.

A cooling labor market gives the Federal Reserve less economic headroom to hike interest rates, which is positive for metal markets. But a separate reading showed this week that private payrolls remained robust in the month through mid-February.

Spot gold was flat at $1,830.06 an ounce, while gold futures steadied at $1,835.25 an ounce by 20:15 ET (01:15 GMT). Both instruments rose around 0.9% on Thursday.

But gold was still down about 2% for the week, after Fed Chair Jerome Powell warned that U.S. interest rates are likely to rise beyond market expectations, given recent strength in inflation and the jobs market.

The dollar rallied on his comments, while some short-term Treasury yields hit their highest levels since the 2008 financial crisis.

Powell noted that future rate hikes will be largely determined by incoming economic readings. U.S. inflation data for February is due next week, ahead of the Fed’s policy meeting on March 22.

Markets have begun pricing in a greater possibility of the Fed hiking rates by a larger 50 basis points this month, following hotter-than-expected inflation readings for January. Strength in the labor market has also underpinned U.S. price pressures.

Rising interest rates bode poorly for metal markets, as they support yields and increase the opportunity cost of holding non-yielding assets.

Other precious metals crept higher on Friday, with platinum and silver futures advancing around 0.1% each. But both metals were headed for sharp weekly losses.

Among industrial metals, copper prices rose on Friday, but were also set to lose for the week, as weak Chinese economic data added to concerns over rising interest rates.

Copper futures rose 0.1% to $4.0113 a pound, and were set to lose 1.4% this week.