Will Strong Jobs Data and Powell’s Cautious Stance Pressure Gold Prices Further?

November Jobs Report to Shape Fed Policy and Market Outlook

The financial markets await Friday’s pivotal nonfarm payrolls report, expected to reveal a significant rebound in U.S. job growth. This report, set to be released at 13:30 GMT, is crucial as it will provide the Federal Reserve with its final comprehensive data set before the December 17-18 policy meeting. The labor market’s performance could influence the Fed’s decision to cut interest rates further, with traders closely watching its potential impact on assets like gold, stocks, and Treasury yields.

Will the Labor Market Recover Strongly in November?

Analysts forecast a rise of 214,000 jobs in November, a sharp recovery from the disappointing 12,000 added in October, which was impacted by hurricanes and strikes. This would mark the strongest job gain since early 2024, bolstered by the return of roughly 40,000 striking workers and stabilization in storm-affected areas. Despite this rebound, the unemployment rate is expected to edge up slightly to 4.2%, reflecting labor force re-entrants. Average hourly earnings are projected to increase by 0.3% month-on-month and 3.9% year-on-year, signaling moderate wage growth.

How Will the Fed Balance Inflation and Employment?

The November jobs report holds particular importance for the Federal Reserve as it evaluates labor market strength against elevated but easing inflation. Recent data suggest slower hiring trends, with monthly payroll gains averaging 128,000 since April. Fed Chair Jerome Powell has hinted at a cautious approach to rate cuts, emphasizing economic resilience but noting that inflation remains higher than desired.

The CME FedWatch tool indicates a 70% probability of a 25-basis-point rate cut in December, but any surprises in job or wage data could sway this outlook. Powell’s comments on Wednesday reaffirmed the Fed’s cautious stance, stating, “The labor market is better, and the downside risks appear to be less in the labor market.”

Is Gold Set for a Bearish Trend Ahead?

Gold prices edged higher on Friday but are set for a second consecutive weekly decline. Spot gold traded at $2,638.66 per ounce, up 0.3%, while U.S. gold futures rose 0.5% to $2,661.00. Analysts attribute the bearish undertone to profit-taking after this year’s rally and expectations of further dollar strength. November’s payrolls data could either reinforce or temper these trends, depending on its implications for rate cuts.

What Should Traders Expect in Stocks and Treasury Yields?

Equity markets and Treasury yields are bracing for volatility as investors assess the labor market’s trajectory. Strong job growth may temper expectations for aggressive rate cuts, potentially pressuring stocks and lifting yields. Conversely, a weaker-than-expected report could fuel bullish sentiment in equities while weighing on yields.

What Is the Short-Term Market Forecast?

Markets are likely to experience heightened volatility following the jobs report. A stronger-than-expected print may result in near-term bearishness for gold and support for the dollar, while stocks could see mixed reactions depending on rate cut expectations. Conversely, weaker job and wage data may fuel bullish momentum in gold and equities, reinforcing expectations for a Fed rate cut in December. Traders should prepare for swift price movements across asset classes as the data unfolds.

More Information in our Economic Calendar.