Gold prices fell on Monday after stronger than expected U.S. nonfarm payrolls data dampened expectations for significant Federal Reserve rate cuts. The robust job market data strengthened the dollar, exerting pressure on gold. By late afternoon, spot gold dropped by 1% to $2,662.20 an ounce, while February gold futures declined by 1.3% to $2,680.01 an ounce.
The primary factor behind the decline was the growing belief that U.S. interest rates would stay higher for longer. Friday’s payroll data led traders to reduce their expectations for rate cuts this year. All eyes are now on the U.S. inflation report due Wednesday, which could offer more insight into the Federal Reserve’s policy outlook. The central bank has maintained that persistent inflation and a strong labor market provide justification for keeping rates elevated.
Analysts at Goldman Sachs revised their projections, now predicting two rate cuts from the Federal Reserve this year instead of the earlier expectation of three. They also anticipate the terminal rate for the easing cycle to be higher than previously estimated.
Despite the pressure on gold, safe-haven demand has been partly supported by economic uncertainty surrounding President-elect Donald Trump’s incoming administration. Broader market sell-offs, particularly in stocks, have also limited gold’s overall losses. However, the rising opportunity cost of holding non-yielding assets, such as gold, in a high interest rate environment continues to weigh on prices. Other precious metals also faced declines, with platinum futures falling by 2.6% to $970.35 an ounce and silver futures dropping by 3.3% to $30.282 an ounce.
Copper prices, on the other hand, rose slightly as the market speculated about potential stimulus measures in China. Benchmark copper futures on the London Metal Exchange increased by 0.2% to $9,098.00 an ounce, while March copper futures gained 0.4% to $4.3217 a pound. These gains followed positive momentum from the previous week, driven by expectations that Beijing might introduce additional economic support.
China’s trade data released on Monday showed copper imports reaching a 13-month high of 559,000 metric tons in December, reflecting robust demand in the world’s largest copper importer. Market participants are optimistic that further stimulus measures could emerge, particularly as President-elect Trump prepares to impose steep tariffs on Chinese goods once he assumes office on January 20. These anticipated policy changes are likely to have significant repercussions for global trade and economic growth.
