Gold prices steady before nonfarm payrolls, weekly losses on tap

Investing.com-- Gold prices steadied on Friday as traders hunkered down before key nonfarm payrolls data, with the yellow metal headed for a weekly loss as risk appetite improved in the wake of dovish signals from the Federal Reserve.

While gold saw some relief from a drop in the dollar and Treasury yields, this was largely offset by traders dumping the yellow metal in favor of more risk-driven assets, particularly stocks and currencies.

Gold was also hit with some profit taking this week, after increased safe haven demand, following the onset of the Israel-Hamas war, saw bullion prices jump over 10% in October. 

But traders were now pricing in a lower risk premium for gold, amid easing concerns that the conflict will spill over into the broader Middle East region. International attempts to broker a ceasefire furthered this notion. 

Spot gold steadied around $1,986.34 an ounce, while gold futures expiring in December were flat at $1,993.70 an ounce by 00:49 ET (04:49 GMT). Both instruments were down about 1% this week.

Nonfarm payrolls in focus after Fed strikes dovish chord 

Markets were now awaiting key nonfarm payrolls data for October, due later on Friday. The reading comes just a few days after the Fed held interest rates steady and offered middling signals on its plans for more rate hikes. This spurred a rush into risk-driven assets, as markets bet that the Fed was done with its rate hike cycle, and will begin trimming rates by mid-2024.

But the payrolls data will be closely watched, given that the Fed still left the door open for one more rate hike this year- although the move will largely depend on the trajectory of inflation and the labor market.

While analysts expect Friday’s data to show a sharp drop in payrolls, the reading has beaten expectations for six of the nine months so far in 2023, reflecting a robust U.S. labor market. 

Traders kept largely clear of gold in anticipation of the reading, given that a strong print could reverse some of the dollar and Treasury losses seen this week. 

Copper prices rise for second straight week, but outlook bleak

Among industrial metals, copper prices rose slightly on Friday and were set for a second straight week of gains, amid some improvement in risk appetite after the Fed decision.

Copper futures rose 0.2% to $3.6928 a pound, and were up more than 1% for the week.

But the outlook for the red metal remained largely weak, following a string of softer-than-expected economic readings from top importer China. A private survey showed on Friday that Chinese service sector activity grew less than expected in October- coming just a day after data showed a contraction in manufacturing activity.

Prices of the red metal had slumped to a near one-year low in late-October, and were still struggling to recover.