Gold prices fell on Thursday as the USD strengthened after a more positive-than-expected January jobs report, weakening expectations of short-term interest rate cuts by the US Federal Reserve (Fed). Investors are now focusing their attention on the inflation data released on Friday to find more clues about the monetary policy roadmap.
Spot gold prices fell 0.5% to 5,061.85 USD/ounce in this afternoon's trading session after rising more than 1% in the previous session. The April gold futures contract in the US lost 0.4% to 5,077.30 USD/ounce.
Mr. Christopher Wong - strategist at OCBC - said that the positive jobs report has caused the market to adjust down expectations of the Fed's early interest rate cut, thereby weakening gold's upward momentum.
The USD index (.DXY) rose after a surprisingly positive labor report, reflecting the health of the US economy. The strengthening greenback made USD-denominated metals more expensive for investors holding other currencies.
According to Mr. Wong, gold's sensitivity to USD fluctuations, bond yield revaluation and uncertainties surrounding Fed policy will continue to create two-way risks for the precious metal in the short term.
The report shows that job growth in the US accelerated in January, with the unemployment rate falling to 4.3%. However, the strongest wage increase in 13 months may partly exaggerate the real health of the labor market, as adjusted data shows that the US economy only created 181,000 jobs in 2025, instead of 584,000 as previously estimated.
In another development, the US Congressional Budget Office (CBO) forecasts that the federal budget deficit will increase slightly to 1,853 trillion USD in fiscal year 2026. The report shows that President Donald Trump's economic policies are making the fiscal picture worse in the context of weak growth.
Reuters' survey results show that the Fed is likely to keep interest rates unchanged until the end of Chairman Jerome Powell's term in May, before starting cuts in June. However, economists warn that policy under potential successor Kevin Warsh may become too loose.
Currently, the market is waiting for the weekly report on unemployment claims to be released on Thursday and inflation data on Friday to further define the Fed's policy direction.
On the other precious metal market, spot silver fell 0.6% to 83.49 USD/ounce after rising sharply by 4% in the previous session. Platinum lost 1.1% to 2,109.45 USD/ounce, while palladium rose slightly 0.3% to 1,705.25 USD/ounce.
