Gold steadies near record high as nonfarm payrolls data looms

© Reuters

Investing.com -- Gold prices hovered below record highs on Friday as traders locked in a measure of recent profits, with markets remaining cautious ahead of key U.S. labor data that is widely expected to factor into monetary policy.

Spot gold prices hit a record high earlier this week after the Federal Reserve hiked interest rates, but outlined a more stringent, data-driven approach to hiking rates further. Markets took this as a sign that the central bank could potentially pause its year-long rate-hike cycle.

Safe haven demand for the yellow metal was also underpinned by worsening sentiment over a U.S. banking crisis after the collapse of First Republic Bank earlier this week. Markets now fear that regional lender PacWest Bancorp (NASDAQ:PACW) could be the next domino to fall, as the U.S. banking system reels from a sharp increase in interest rates. 

Spot gold was flat around $2,049.89 an ounce in early trade on Friday, after briefly hitting a record high of $2,080.72 an ounce late-Wednesday. Gold futures for June delivery were flat at $2,056.40 an ounce, after touching a record high of $2,082.80 an ounce earlier.

Both instruments were set to gain between 3% and 3.6% this week, their best weekly gain in nearly two months.

Weakness in the dollar also benefited bullion prices, as the greenback tumbled after the Fed meeting, tracking a slide in U.S. Treasury yields.

Focus is now squarely on U.S. nonfarm payrolls data for April, due later in the day. While the reading is expected to show some cooling in the jobs market, any indicators to the upside could fuel fears of more Fed rate hikes. 

Still, Fed Fund futures prices show that markets are pricing in an over 90% chance that the central bank will keep interest rates steady in June. The prospect of a Fed pause, coupled with worsening economic conditions, could bode well for gold this year, given that rising rates push up the opportunity cost of holding non-yielding assets.

Other precious metals steadied on Friday. Silver futures were flat at $26.323 an ounce, while platinum futures fell 0.2% to $1,052.15 an ounce.

Among industrial metals, copper prices inched higher as Chinese markets reopened after the Golden Week holiday, with recent data showing that consumer spending and travel demand rebounded in the country.

But copper was still set for a third straight week in red, as markets feared that worsening economic conditions will erode demand for the metal. Chinese manufacturing activity also unexpectedly shrank in April.

Copper futures rose 0.1% to $3.8608 a pound, and were down 0.8% for the week.