Gold declined for a third consecutive session, struggling once again to break through the $ 4200 / Oz level.
The difficulty is partly tied to the nature of the current macro development and Treasury market sentiment. According to the CME FedWatch Tool, the December rate cut is again priced as almost certain at close to a 90 percent probability, while January also carries more than a 90 percent chance of at least a 25-basis-point reduction.
Yet gold is showing an unusual reluctance to capitalize on this dovish shift. The disconnect suggests that rate expectations, while supportive, are no longer sufficient to drive the next leg higher without broader risk aversion accompanying them.
One factor shaping this hesitation is the broader improvement in Treasury-market sentiment. The ICE BofA Move Index, which helps to measure the fear in the US T-bond market, has fallen toward its lowest readings since 2021.
A quieter bond market implies reduced fear toward public-finance conditions, which lowers the urgency for defensive hedging. The environment is also being lifted by pockets of stabilization in the economic cycle, where select indicators show that activity is no longer deteriorating as sharply as earlier in the year.
The latest ADP report offered a mixed signal that tempers the bearish narrative. According to the payroll processor, private sector hiring fell by 32,000 jobs in November, reversing October’s estimated gain of 47,000 and underscoring ongoing weakness, particularly among small businesses that shed a net 120,000 positions.
Still, the report included subtle signs of improvement. Before Thanksgiving, the delayed September jobs report showed the economy added 119,000 net positions, and recent jobless-claims data pointed to no acceleration in layoffs.
ADP reported also that the slump in hiring remains concentrated in small firms, while larger companies continue to expand at a modest pace. The release therefore reinforces the view that the labour market is cooling, not collapsing, leaving the Federal Reserve more comfortable with its current easing trajectory.
Fresh softness in the services sector introduces an additional headwind for gold. The ISM Services PMI rose modestly to 52.6 in November, beating expectations and signalling continued expansion in business activity and new orders. According to Steve Miller, chair of the survey committee, the combination of stronger backlogs and ongoing demand points to the early stages of a recovery in services.
For gold, this resilience adds pressure because it dampens recession fears and eases the urgency for safe-haven flows, especially as inflation pressures in the sector have softened with the price index falling to its lowest since April.
Another factor weighing on sentiment comes from the industrial side. The Federal Reserve reported that US industrial production rose by 0.1 percent in September after a 0.3 percent decline the prior month. While the gain was driven entirely by utilities, the stabilization in manufacturing output nonetheless suggests that the contractionary phase is losing intensity.
The incremental signs that the industrial economy is not deteriorating further can act as a mild drag on upside potential.
