Gold drops 1% as robust US jobs data strengthens dollar

Gold prices dipped on Monday as the US dollar soared to an over two-year high after a robust jobs report last week cemented expectations the Federal Reserve would proceed with caution in cutting interest rates this year.

Spot gold fell 1% to USD 2,661.76 per ounce as of 03:57 p.m. ET (2057 GMT). Prices hit their highest in a month on Friday. US gold futures settled 1.3% lower at USD 2,678.60.

“We had a better-than-expected US job report which strengthened the US dollar and the Treasury yields… (Gold’s) move lower here is some follow-through on the stronger than expected report,” said Bob Haberkorn, senior market strategist at RJO Futures.

There is also some profit-taking after gold had a great week last week, Haberkorn added.

The dollar index rose to its highest since November 2022 after the US jobs report underscored the strength of the economy and muddied the Fed outlook.

A higher dollar makes bullion more expensive for overseas buyers.

Trump will be sworn in as president of the US next week. His proposed tariffs and protectionist trade policies are expected to be inflationary and could spark trade wars, adding to gold’s allure as a safe-haven asset.

Investors now await US inflation data, weekly jobless claims and retail sales this week for further insights into the economy and the Fed’s policy plans.

“Should CPI inflation data on Wednesday show signs of persisting, any calls for a rate cut in the first half of the year will be firmly dismissed again,” Fawad Razaqzada, market analyst at City Index and FOREX.com, wrote in a note.

Currently, markets expect a 25-basis-point cut this year, compared with expectations of 40 basis points last week.

Higher interest rates make the non-yielding bullion less attractive.

Spot silver lost 2.6% to USD 29.62 per ounce, platinum dropped 1.4% to USD 950.90 and palladium shed 0.5% to USD 943.50.

(Reporting by Anjana Anil in Bengaluru; Editing by Krishna Chandra Eluri and Shreya Biswas)