February gold contracts on Thursday pared losses to to finish virtually flat at $1,173.60 a troy ounce at 4:59 pm ET. The futures price had previously declined to its lowest settlement in nearly ten months.
Bullion has declined more than 10% since November 4, weighed down by growing expectations the US Fed will raise interest rates in two weeks’ time. Higher US interest rates are typically viewed as a negative for bullion, which doesn’t pay interest. The markets have priced a nearly 100% probability of higher interest rates in December, according to the CME Group’s FedWatch Tool.
The Federal Open Market Committee (FOMC) will deliver its final policy decision of the year on December 14. It will be accompanied by revised projections for GDP, unemployment and inflation.
The dollar measured against a basket of other major currencies was down 0.6% on Thursday. It briefly touched new 14-year highs in the previous session after stronger than expected jobs and personal income data.
Investors are now turning their attention to Friday’s nonfarm payrolls report, which is arguably the most closely followed market event of the month. Labor economists are expected to show the creation of 170,000 US jobs last month, more than enough to convince policymakers the economy is on solid footing. The unemployment rate is also expected to hold steady at 4.9%.
Last week, the Federal Reserve Bank of Atlanta forecast the US economy to expand at an annualized 3.6% in the fourth quarter. On Tuesday, the Commerce Department revised its estimate of third quarter GDP to reflect year-over-year growth of 3.2%.
The Labor Department reported on Thursday that jobless claims rose by 17,000 to a seasonally adjusted 268,000 in the week ended November 25. While much higher than expected, jobless claims have now been below 300,000 for 91 consecutive weeks, the longest stretch since 1970. The four-week moving average for claims, which parses out week-to-week volatility, rose by 500 to 251,500.
Comex Gold Futures (February 2017)