The price of gold rose by about 0.4% after falling by 1.84% yesterday amid profit-taking and correction of positions by investors ahead of the publication of US labor market data. The price recovery was driven by buying the dips, as well as increased demand for safe haven assets due to uncertainty surrounding the outcome of the US presidential election.
Donald Trump and Kamala Harris remain neck and neck in several polls, but some investors have been putting on trades betting Trump will win, lifting the dollar and U.S. Treasury yields. Trump's victory may also slow down the pace of monetary policy easing by the Fed. According to the CME FedWatch Tool, markets see a 95.2% probability of a 0.25% rate cut at the November meeting (compared to 95.1% a week earlier) and a 72.2% probability of a 0.25% rate cut in December (compared to 74.6% a week earlier). Lower rates generally enhance gold's allure, as bullion yields no interest.
The further growth of gold was limited by the strengthening of the US currency and an increase in the yield of US Treasury bonds. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.16% to 104.14. The yield on 10-year US bonds increased by 1.3 basis points to 4.297%.
The next catalyst for gold will be the nonfarm payrolls report for October, which will be published at 12:30 GMT. Market participants hope that these data will provide additional clues about the prospects for the Fed's interest rate. According to forecasts, nonfarm payrolls rose by 115 thousand after an increase of 254 thousand in September, the unemployment rate remained at 4.1%, and the growth rate of average hourly earnings slowed to 0.3% m/m from 0.4% m/m.