Gold prices fell due to profit-taking and a correction after the recent rally, but recovered more than half of the losses recorded at the beginning of the previous trading session, according to Kitco.
The US dollar has retreated from its intraday highs and is now slightly lower, providing buying momentum for gold, although buying was limited by rising US Treasury yields today.
Gold markets faced technical selling pressure and largely ignored US labor data showing initial jobless claims rose to a six-week high.
Initial jobless claims increased by 6,000 to a seasonally adjusted 223,000 in the week ended January 18, the U.S. Department of Labor said on Thursday.
The figure was slightly higher than forecast, with experts expecting claims to come in at 221,000. The previous week's figure was unchanged at 217,000.
Gold markets were muted on the latest jobs data after failing to clear initial resistance at $2,750 an ounce in overnight trading.
Meanwhile, the four-week moving average of new claims — often considered a more reliable gauge of the labor market because it smooths out weekly fluctuations — hit 213,500, up 750 from the previous week's unadjusted average.
While the number of Americans filing initial claims for benefits remains relatively steady, the report suggests that unemployed people are having difficulty getting back into the labor market.
Continuing jobless claims — which represent the number of people receiving benefits — rose 46,000 to 1.974 million, significantly higher than the previous week's revised figure of 1.853 million.
"The report shows this is the highest level for continuing unemployment claims since November 13, 2021, when the number was also 1.974 million," the report said.
Some economists say investors should pay attention to the continued rise in jobless claims, as this could be a sign of growing weakness in the labor market.
Next week, the European Central Bank (ECB) and the US Federal Reserve (FED) will hold monetary policy meetings. The ECB is expected to cut interest rates by 25 basis points, while the FED will keep interest rates unchanged.
A rate cut by the ECB would weaken the euro against the dollar. A weaker euro typically increases the attractiveness of the dollar, making gold, which is priced in dollars, more expensive for investors using other currencies. This could put downward pressure on gold prices.
However, lower interest rates typically reduce bond yields, which in turn drives investors to safe-haven assets like gold. This could support gold prices in the medium term.
The Fed's decision to keep interest rates unchanged shows the stability of monetary policy in the US. This could cause the USD to continue to maintain its strength, creating downward pressure on gold prices.
So if the ECB does cut rates and the Fed keeps them unchanged, gold prices could face short-term downward pressure due to the strength of the USD. However, the decline may not be as deep if bond yields fall and safe-haven sentiment increases.
Investors can closely monitor detailed policy signals from the ECB and the FED, as well as the movements of the USD and US Treasury yields before making a decision.
