Gold prices steady at $2,050 as dollar slides before nonfarm payrolls data

Investing.com-- Gold prices steadied near a two-week high on Friday, crossing key levels as unwavering bets on interest rate cuts by the Federal Reserve weighed on the dollar, with nonfarm payrolls data due later in the day set to provide more cues. 

The yellow metal largely brushed off signals from the Fed that interest rate cuts will come later than expected this year, instead capitalizing on losses in the dollar and moving closer towards 2024 peaks. 

But gains in gold prices cooled on Friday as markets hunkered down before the payrolls data, which is largely expected to factor into the Fed’s plans for interest rates.

Spot gold rose 0.1% to $2,056.20 an ounce- crossing the $2,050 level for the first time in two weeks, while gold futures expiring in March rose 0.1% to $2,073.35 an ounce by 00:47 ET (05:47 GMT). The two were also up about 1.9% this week, and were set to snap two straight weeks of losses. 

Gold’s recovery also comes after a rough start to 2024, with the yellow metal falling 1.2% as markets began steadily pricing out expectations for a March interest rate cut.

Markets position for May rate cut as payrolls data looms 

While the Fed largely shot down expectations for a rate cut in March, the CME Fedwatch tool showed traders were now pricing in the possibility of a 25 basis point cut in May- which benefited bullion prices. 

The central bank is also expected to cut rates at least four more times after May, according to Goldman Sachs analysts. 

While U.S. rates are expected to remain high in the near-term, the prospect of an eventual decline in rates- which was also flagged by Fed Chair Jerome Powell at a meeting earlier this week- bodes well for bullion prices. 

Still, the Fed has given no clear indication on the timing and scope of its planned rate cuts, and has presented a largely data-driven approach to any rate cuts.

To this end, nonfarm payrolls data due later on Friday is expected to largely factor into the Fed’s outlook. The central bank has signaled that a cooling labor market will also be considered when cutting interest rates.

Friday’s data is expected to show some cooling in the labor market through January. But the reading has consistently surprised to the upside. 

Copper prices dip, head for weekly losses on China woes 

Among industrial metals, copper prices fell on Friday and were set to end the week lower, amid persistent concerns over a sluggish economic recovery in top importer China.

Copper futures expiring in March fell 0.5% to $3.8342 a pound, and were down 0.3% this week.

Losses in copper were driven chiefly by underwhelming purchasing managers index data from China, with official data showing that manufacturing activity remained in contraction through January. This fed into concerns over a demand slowdown in the country.