Gold off one-year highs as dollar firms ahead of U.S. payrolls data

The dollar gained some ground on Thursday, and gold prices fell from their one-year-highs. Investors were waiting for the U.S. Non-farm Payrolls Report to gauge the Federal Reserve's policy.

As of 0334 GMT spot gold was down 0.5% to $2,011.18 an ounce after reaching its highest level since March 2022 Wednesday. U.S. Gold Futures dropped 0.4% to $2.028.40.

Dollar index rises 0.2% making gold more expensive for foreign buyers

Ajay Kedia of Kedia Commodities, Mumbai, said: "This market is due for a technical correction as the rally was so sharp."

He noted that the economic data this week was a major component in supporting gold prices.

Bullion is up about 2.2% this week after a sudden oil production cut by OPEC+, and weak U.S. data last week, added to fears of a slowdown in the economy and sent the yellow-metal soaring over $2,000.

The data released on Wednesday showed that the U.S. service sector contracted more than anticipated in March. Separate data revealed that private sector job additions were far below expectations.

Investors are now awaiting Friday's nonfarm payroll report for March.

Gold is often considered to be a hedge against inflation or economic uncertainty, but higher interest rates have diminished its appeal.

According to CME's FedWatch, the markets see a 53.8% probability that the Fed will not raise interest rates at its May policy meeting. Loretta Mester, President of the Cleveland Federal Reserve Bank, said that it is too early to tell if interest rates will need to be raised at the Fed's May policy meeting.

In a recent note, Edward Moya said that the gold market is becoming overcrowded, but that the macro-background is still in its favor. He added the immediate resistance for gold is the level of $2,050.