Investing.com - This week precious metals traders will get a fresh update on the health of the U.S. economy from data on retail sales and consumer prices amid speculation over whether the Federal Reserve may slow the pace of interest rate hikes next year.
Markets have dialed back expectations on the pace of Fed rate hikes in 2019 in the wake of recent market turmoil. Wall Street ended its worst week since March on Friday amid a selloff triggered by concerns over a slowing economy and mounting trade war fears.
Gold prices settled at their highest level since July on Friday and notched up the largest weekly gain since August as the market turmoil bolstered safe haven demand for the precious metal.
Gold futures were up 0.84% at $1,254.05 on the Comex division of the New York Mercantile Exchange late Friday, to end the week with a gain of 2.17%.
Data on Friday showed that the U.S. economy created fewer-than-forecast new jobs in November, while October’s figure was revised lower.
Wage growth rose in line with forecasts, keeping the Fed on track to hike interest rates this month. But the report indicated that the labor market may not be as strong as hoped, easing pressure on the Fed to keep hiking rates in 2019.
Fed Chairman Jerome Powell said last week that U.S. interest rates were nearing neutral levels, which markets interpreted as signaling a slowdown in rate rises.
The dollar ended lower against a currency basket on Friday, with the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, slipping 0.12% to 96.65 for a weekly loss of 0.3%.
A weaker dollar can boost commodities priced in the greenback as it makes it cheaper to users of other currencies. Lower bond yields can also be a positive for commodities, which don’t offer a yield.
"Soft employment report reinforces the narrative that we have perhaps seen the highs in employment ... so I think a December hike is done but anything in 2019 is up in the air," said Tai Wong, head of metals trading at BMO.
“Interest rate futures IRPR suggested traders see not more than one rate increase from the Fed next year, compared with previous expectations for possibly two rate hikes. Increased volatility and geopolitical risk, macro asset allocation is becoming more gold-positive again while we believe much of the dollar's upward move is now behind us with rate hike expectations dropping," analysts at BMO Capital Markets said in a note.
Gold, which is considered a safe investment during times of financial, economic and geopolitical uncertainty, has recovered about 7% from 19-month lows hit in mid-August.
"At this point it looks like the price of gold has a strong foundation at these levels and should remain in a bullish mode the rest of the year," Walter Pehowich, executive vice president of investment services at Dillon Gage Metals, wrote in a note.
Elsewhere in metals trading, silver was up 1.35% to $14.705 a troy ounce, to end the week 3.37% higher, while copper ended at $2.748, up 0.18% for the day, paring the week’s losses to 1%.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, December 10
The UK is to publish its monthly GDP report, along with data on manufacturing and industrial production.
Tuesday, December 11
The UK is to publish its latest employment report.
The ZEW Institute is to report on German economic sentiment.
The U.S. is to produce figures on producer price inflation.
The British parliament is to vote on Prime Minister Theresa May’s Brexit plan that she negotiated with Brussels.
Wednesday, December 12
The euro zone is to release data on industrial production.
The U.S. is to publish consumer price inflation figures.
Thursday, December 13
The Swiss National Bank is to announce its Libor rate and publish its monetary policy assessment.
The European Central Bank is to hold its final policy meeting of 2018, which will be followed by a press conference with President Mario Draghi.
The U.S. is to publish the weekly report on initial jobless claims.
Friday, December 14
China is to release data on industrial production and fixed asset investment.
The euro zone is to release data on private sector business activity.
The U.S. is to round up the week with data on retail sales.
-- Reuters contributed to this report