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Gold Pares Gains as US Data Affirm Fed’s Cautious Rate-Cut Path

By Sybilla Gross
A 500 gram gold bar arranged at Gold Investments Ltd. bullion dealers in London, UK, on Tuesday, May 21, 2024. Gold slipped — after hitting an all-time high in the previous session — with investors assessing recent hawkish commentary from Federal Reserve officials that downplayed the possibility of imminent rate cuts. Photographer: Chris Ratcliffe/Bloomberg (Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Gold pared gains as the dollar pushed higher after latest US economic data helped reinforce a cautious approach by American policymakers to monetary easing this year.

Growth at US service providers quickened in December, and that helped push a price measure to the highest since early 2023. Separate data showed US job openings rose to a six-month high in November, boosted by a jump in business services while other industries showed more mixed demand for workers.

The economic readings pointed to a still-healthy labor market in the US and that inflation has remained stubborn. They lay the ground for Federal Reserve officials, who have reaffirmed the view that the US central bank will take a more cautious approach to cutting rates this year as they want to see more progress on easing price pressures. Swap traders no longer fully price in a Fed rate cut before July.

Bullion got a boost earlier Tuesday on dollar weakness and an announcement of gold purchases by China’s central bank in December. The People’s Bank of China played a crucial role in driving gold’s stellar run last year. And a soft greenback makes the precious metal more appealing for investors holding other currencies as it’s priced in the US currency.

China’s central bank released figures earlier Tuesday showing it expanded its gold reserves for a second month in December, signaling renewed appetite after temporarily pausing purchases last year as prices soared. Its gold reserves stood at 73.29 million troy ounces in December, rising by more than 300,000 troy ounces from November.

Gold traders will now eye a slew of US data for clues on the Federal Reserve’s monetary easing path this year. The US jobs report, due Friday, is expected to show a moderating yet still healthy labor market. The data are unlikely to alter the view that the Fed will take a more cautious approach to cutting rates this year amid renewed concerns about inflation.    

Spot gold rose 0.5% to $2,648.70 an ounce as of  10:56 a.m. in New York. The Bloomberg Dollar Spot Index rose 0.1%. Silver, platinum and palladium all advanced. 

--With assistance from Sybilla Gross, Preeti Singh and Jack Ryan.

©2025 Bloomberg L.P.