Gold prices fall from record highs with rate cuts, payrolls in focus

Investing.com-- Gold prices fell in Asian trade on Thursday, facing some profit-taking at record highs as the dollar steadied ahead of more cues on the U.S. labor market and interest rate cuts, due in the coming days. 

The yellow metal hit a series of record highs over $3,500 an ounce this week, amid growing conviction that the Federal Reserve will cut interest rates later this month. Safe haven demand for gold was also boosted by concerns over stretched government debt levels in the developed world.

Spot gold fell 0.8% to $3,531.69/oz, while gold futures for December fell 1.3% to $3,589.92/oz by 01:14 ET (05:14 GMT). 

Gold faces some profit-taking from recent records 

Spot gold surged to a record high of $3,578.80/oz earlier this week, as safe haven demand for the yellow metal was boosted by a slew of factors. But this left the yellow metal open to some profit-taking, especially amid some easing concerns over Fed independence. 

Uncertainty over U.S. trade tariffs, after an appeals court ruled that most of President Donald Trump’s levies were illegal, added to gold demand. Trump signaled that he will appeal the ruling with the Supreme Court, and that any ruling against his tariffs will bode poorly for recent trade deals signed by his administration.

Concerns over Fed independence also remained in play amid a legal tussle over Trump’s attempts to fire Fed Governor Lisa Cook. But these concerns were somewhat soothed by Stephen Miran, Trump’s nominee for Fed Governor, pledging to maintain the central bank’s independence from politics.

Weakness in the dollar earlier this week boosted gold and other precious metal prices, although a mild recovery in the greenback sparked a broad reversal in metal prices from recent peaks.

Spot platinum fell 0.9% to $1,411.09/oz, while spot silver fell nearly 1% to $40.8295/oz.

Among industrial metals, benchmark copper futures on the London Metal Exchange fell 0.8% to $9,909.50 a ton, retreating from a near six-month high, while COMEX copper futures fell 1.1% to $4.5685 a pound. 

Copper surged this week amid increasing bets that top importer China will unlock more stimulus to boost domestic growth, which could in turn increase the country’s appetite for copper.

Fed rate cuts, nonfarm payrolls in focus 

Metal markets were boosted by increasing bets that the Fed will cut rates in September. Fed Fund futures indicated markets were pricing in a nearly 97% chance the central bank will cut rates by 25 basis points during its September 16-17 meeting, CME Fedwatch showed.

Before that, markets were looking to key U.S. nonfarm payrolls data, due on Friday, for more cues on the labor market. Several Fed officials signaled this week that a cooling labor market will make the Fed more open to cutting rates, echoing a similar sentiment from Chair Jerome Powell in August. 

JOLTS job openings data read cooler than expected for July, furthering the notion that the labor market was cooling. U.S. purchasing managers index data also showed a sustained contraction in the manufacturing sector in August, furthering speculation over a cooling U.S. economy. 

Lower rates tend to benefit non-yielding assets such as gold, given that they lower the opportunity cost of investing in the sector.