Gold Price Forecast: XAU/USD edges lower below $4,000 as private payrolls rebound in October

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Gold price loses momentum to around $3,970 in Thursday’s Asian session.
US companies added 42,000 jobs in October, ADP showed.
The ongoing US government shutdown has entered its 37th day, which officially makes it the longest in US history.

Gold price (XAU/USD) declines to near $3,970 during the Asian trading hours on Thursday. The precious metal edges lower as traders weigh the outlook for the US Federal Reserve (Fed) path after the upbeat US economic data. The Fed officials are scheduled to speak later on Thursday, including Michael Barr, John Williams, Anna Paulson, Beth Hammack, Christopher Waller, and Alberto Musalem.

Private sector employment in the US came in stronger than expected, signaling some stabilization in the job market after two straight months of declines. Private-sector payrolls rose by 42,000 in October, compared to the 29,000 decrease (revised from -32,000) seen in September, the Automatic Data Processing (ADP) showed Wednesday.

The ADP report is one of the few monthly snapshots of the labor market, as the longest government shutdown in US history delays the release of official economic data. The better US jobs data lifts the US Dollar (USD). A stronger USD makes gold more expensive for foreign buyers, reducing global demand and weighing on the non-yielding yellow metal.

Furthermore, hawkish remarks from Fed officials could undermine the yellow metal. After the US central bank cut its interest rates last week for a second consecutive meeting, Fed Chair Jerome Powell said that he sees “very gradual cooling” in the labor market, but nothing more than that.” He made it clear that another reduction at the Fed’s next meeting in December wasn’t certain.

On the other hand, the uncertainty and ongoing US federal government shutdown, which is now the longest in history, could boost safe-haven assets like the Gold price. The Senate is not currently set to vote on a House-passed measure to reopen the government on Thursday, after it failed to advance for the 14th time on Tuesday.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.