On Thursday (December 5th) morning trading in the Asian market, spot gold fluctuated narrowly and is currently trading around $2649.49 per ounce. Gold prices rose slightly on Wednesday, closing around $2649.74 per ounce, after data showed moderate growth in private employment in the United States last month, while investors digested Federal Reserve Chairman Powell's speech and looked forward to Friday's non farm payroll report.

Independent metal trader Tai Wong said, 'The ADP employment data was disappointing, slightly below market expectations, and gold rebounded. After a month of hurricanes and Boeing strikes, the market had hoped for a greater rebound in the job market.'.

The ADP report shows that there was an increase of 146000 private employment positions last month. Economists originally predicted that there would be an increase of 150000 private employment opportunities.

After a significant increase in recent months, the activity of the US service industry slowed down in November, although still above the level that is in line with the steady growth of the economy in the fourth quarter.

ISM reported that the US Non Manufacturing Purchasing Managers' Index (PMI) rose sharply to 56.0 in October, the highest since August 2022, and then fell to 52.1 in November. Economists previously predicted that the service sector PMI for November would drop to 55.5.

The Federal Reserve stated in its Beige Book on Wednesday that since early October, economic activity in most parts of the United States has slightly expanded, employment growth has been "sluggish," inflation has risen slightly, and businesses are optimistic about the future.

Federal Reserve Chairman Powell stated that recent economic performance will make the Fed more cautious in its future path of interest rate cuts.

Investors are currently waiting for Friday's crucial US non farm payroll report and next week's inflation data to find clues about the Federal Reserve's policy trajectory.

Everett Millman, Chief Market Analyst at Gainesville Coins, stated that gold's response on Wednesday was lackluster, and it is expected that the upcoming US non farm payroll data will have a greater impact. If the data shows weak employment, it will provide support for gold prices.

Traders believe there is a 77% chance that the Federal Reserve will cut interest rates by 25 basis points at its meeting on December 17-18.

Global geopolitical turmoil has also provided support for safe haven gold, including political turmoil in South Korea, the French government facing collapse, the Russia Ukraine war, and Israel's threat to go to war with Lebanon if the ceasefire agreement with Hezbollah breaks.

It should be noted that sources say that Trump's envoy met with the prime ministers of Qatar and Israel to push for a ceasefire before January 20th. If everything goes smoothly, it may suppress the safe haven demand for gold

On this trading day, the number of layoffs by challenger companies in the United States for November, the number of initial jobless claims for the week ending November 30th, and the US trade account for October will also be released. Investors need to pay attention.

Daily chart of spot gold

Powell: The Federal Reserve can be more cautious

Federal Reserve Chairman Jerome Powell said on Wednesday that the current economy is stronger than expected when the Fed began cutting interest rates in September, and seems to be sending a signal of support for slowing down the pace of interest rate cuts in the future.

The economic situation in the United States is very good, there is no reason not to continue... The downside risk in the labor market seems to have decreased, economic growth is definitely stronger than we imagined, and inflation rates are slightly higher, "Powell said at an event in The New York Times." So the good news is that we can be more cautious when we try to find a neutral level

Powell's half-hour interview was extensive in content, only casually discussing monetary policy and the economy. This may be his last speech before the December 17-18 policy meeting, as the quiet period for Fed officials not to discuss monetary policy before the meeting began on Saturday.

Some of Powell's colleagues' in-depth comments this week pointed out the direction of the third consecutive interest rate cut. Governor Christopher Waller said on Monday that he "tends" to cut interest rates, although others refused to pre commit to this outcome.

Powell's speech on Wednesday seemed to align with these more cautious decision-makers and largely echoed his last public appearance in mid November, when he stated that the Federal Reserve could "carefully" consider cutting interest rates and not act too hastily.

The subsequent inflation and employment data, especially Waller's remarks, greatly boosted the market's expectation of another 25 basis points reduction in the benchmark interest rate to the range of 4.25% -4.50%.

As summarized by economists at BMO, "Powell hardly said anything to change the market's view that the Fed may cut interest rates.

The Chairman of the Federal Reserve has consistently emphasized the need for the Federal Reserve to maintain open options in the face of increased uncertainty in broader economic policy forms in the coming year, concerns among some that the Fed's progress on inflation has stalled, and evidence that concerns about a job market downturn have been avoided.

Powell said on Wednesday that the Fed's 50 basis point rate cut in September was to "send a strong signal that if the labor market continues to weaken, we will provide support for it. At that time, the unemployment rate had risen and wage growth had slowed down, and at least one Federal Reserve official publicly expressed concerns that the Fed's next problem could be low inflation. On the contrary, in the months following that, we received some data corrections, which strongly indicated that the economy was stronger than we had imagined

Federal Reserve officials will receive new data on the labor market on Friday and new data on inflation next week, which will not only help them make decisions at this year's final policy-making meeting, but also help them make predictions about next year's policy outlook.

At the same time as Powell's speech, a survey released by the Federal Reserve showed that American businesses are optimistic about demand growth in the coming months, but also concerned about the potential inflationary impact of tariffs promised by President elect Trump.

Powell said on Wednesday that the decision the Federal Reserve will make today is "not related to this, but to the current economic situation" as specific policies are still unknown.

Earlier on Wednesday, two other Federal Reserve officials - the head of the Richmond and St. Louis regional Federal Reserve - also remained tight lipped.

I remain open to all options, "said St. Louis Fed President Alberto Musalem at the Bloomberg monetary policy meeting, studying newly received data before deciding whether to cut interest rates again in two weeks.

Richmond Fed President Thomas Barkin said at CNBC's Chief Financial Officers Committee that he believes inflation and employment are moving in the right direction, but he will not pre judge the outcome as there will be more data before the meeting.

A key indicator for measuring inflation - the Personal Consumption Expenditures (PCE) price index, which excludes food and energy costs - has been fluctuating in the range of 2.6% to 2.8% since May, far exceeding the Federal Reserve's target of 2%.

Service industry activity in the United States cooled down in November

After a significant increase in recent months, the activity of the US service industry slowed down in November, but still exceeded the level that is in line with the steady growth of the economy in the fourth quarter.

The Institute for Supply Management (ISM) survey on Wednesday also showed that American businesses are concerned that the incoming administration of President elect Trump may impose tariffs on imported goods and warn that prices will rise. Economists have also expressed similar views.

ISM reported that the US Non Manufacturing Purchasing Managers' Index (PMI) rose sharply to 56.0 in October, the highest since August 2022, and then fell to 52.1 in November.

Economists surveyed previously predicted that the service sector PMI for November would drop to 55.5. A reading above 50 indicates growth in the service industry, which accounts for over two-thirds of the total economy. ISM believes that overall, readings above 49 over a period of time indicate overall economic expansion.

The economy seems to have maintained the growth momentum of the third quarter, with consumer spending growing rapidly in October. With the significant increase in car sales, consumption in November may still be strong. Construction expenses also rebounded in October, but corporate spending on equipment may have slowed down.

The Atlanta Fed currently predicts that the annual growth rate of gross domestic product (GDP) for this quarter will be 3.2%. The economic growth rate in the third quarter was 2.8%.

Although the service sector PMI has declined, more companies reported growth in November compared to October. Among the 14 industries reported for expansion, there are wholesale trade, finance and insurance, as well as construction and utilities. Only three industries, including mining, have experienced shrinkage.

Tariffs are the most concerning issue for some businesses. Some construction industry professionals have stated that although they anticipate an increase in residential construction, the "unknown impact of tariffs casts a shadow over the future". Others in the information industry are concerned that tariffs will affect the prices of electronic products and components by 2025.

The new order index in the ISM survey decreased from 57.4 in October to 53.7. Nevertheless, domestic demand remains robust.

Data released later on Tuesday showed that the seasonally adjusted annualized growth rate of motor vehicle sales in November increased from 16 million in October to 16.5 million, the highest level since May 2021. Oxford Economics estimates that the growth in car sales is expected to lead to an inflation adjusted increase in consumer spending of over 3% in the fourth quarter.

The ISM survey also showed that the service industry input price index did not change significantly, at 58.2. The employment index of the service industry fell from 53.0 in October to 51.5.

ADP data is weaker than market expectations

The ADP National Employment Report released on Wednesday showed an increase of 146000 private sector jobs in November, with economists previously expecting an increase of 150000. The growth rate for October has been revised down to 184000 units, compared to the previous value of 233000 units.

It is expected that non farm employment growth will accelerate in November, after Hurricane Helen and Milton, as well as strikes by factory workers at Boeing and another aerospace company, resulted in almost stagnant employment growth.

A Reuters survey shows that non farm payroll jobs may increase by 200000 in November, compared to only 12000 in October, the smallest increase since December 2020.

Federal Reserve's Beige Book: Economic activity in most parts of the United States has slightly expanded in recent weeks

The Federal Reserve stated in its Beige Book on Wednesday that since early October, economic activity in most parts of the United States has slightly expanded, employment growth has been "sluggish," inflation has risen slightly, and businesses are optimistic about the future.

Although the growth rate of economic activity is generally small, most regions and industries have slightly increased their expectations for economic growth, "said the Federal Reserve's Beige Book." Business contacts are optimistic that demand will rise in the coming months“

The Beige Book is an economic assessment report regularly released by the Federal Reserve, compiled from observations of 12 regional Federal Reserve business and community contacts as of November 22.

The brown book points out that most regions reported small growth rates, but three regions reported "moderate or moderate" growth, while two regions reported "flat or slightly slower" growth.

The latest brown book is compiled by the Kansas City Fed. The description of the employment situation by enterprises is largely similar to the situation observed by the Federal Reserve in their jurisdiction, that is, "recruitment activities are sluggish, few contacts claim to have recently increased manpower, and almost all enterprises report abnormally low worker turnover rates".

According to the Brown Book, most regions have also reported moderate employee wage growth and will continue to maintain this trend, with many areas similar to the findings of the St. Louis Fed's survey, which states that "contacts expect wages to continue to rise at a similar pace in the coming months.

The Brown Book points out that inflation is generally mild, but contacts in several regions have mentioned the risk of price increases in the future due to the expected implementation of new tariffs by the incoming administration of President elect Trump.

According to the Beige Book, the Philadelphia Fed report states: "Many businesses have expressed concerns that tariffs will lead to price increases. In the fourth quarter of 2024, the truncated mean of inflation expectations for all businesses was 3.3%, higher than the 3.0% in the third quarter

The above survey results will affect the thinking of Federal Reserve decision-makers on how quickly further interest rate cuts may be needed and how much more interest rate cuts are needed. After the interest rate cuts in September and November, the Federal Reserve's current policy rate target range is 4.50% -4.75%. Many Federal Reserve decision-makers say they still believe inflation will fall, especially with short-term borrowing costs far above neutral interest rates

US Treasury yields fall as market expectations suggest the Federal Reserve may cut interest rates in December

US Treasury yields fell on Wednesday as weak economic data offset the impact of Fed officials' comments and reversed the trend, and the market continues to expect the Fed to cut interest rates by 25 basis points at its December meeting.

At first, the yield increased, and previously, St. Louis Federal Reserve Bank President Musalem stated that it may take another two years to bring inflation rates to the Fed's target, and the pace of future action becomes less clear.

However, the ADP National Employment Report shows that private employment increased by 146000 in November, and a survey by the Institute for Supply Management (ISM) on Wednesday showed that US service industry activity slowed down in November after a significant increase in recent months.

Vail Hartman, a capital markets analyst at Montreal Bank, said, "The market still expects the Federal Reserve to cut interest rates by 25 basis points in December, but CPI and non farm payroll data will have an impact

The yield on 10-year US Treasury bonds fell 3.7 basis points to 4.184% on Wednesday. The two-year yield fell 3.9 basis points to 4.132% on Wednesday.

The last interest rate meeting of the Federal Reserve this year will be held in two weeks, and financial markets are betting that the Fed will lower borrowing costs by 25 basis points, despite the fact that inflation has proven to be more sticky than expected.

A key indicator for measuring core price pressure, the year-on-year increase in the Personal Consumption Expenditures (PCE) price index excluding food and energy prices, has remained in the range of 2.6% to 2.8% since May, far exceeding the Federal Reserve's target of 2%.

The United States will release non farm payroll data for November on Friday, and the consumer price index will be released next Wednesday.

The South Korean National Assembly has proposed a motion to impeach President Yoon Suk yeol, which requires the support of eight ruling party members. The ruling party has vowed to oppose it

On Thursday, the South Korean National Assembly officially proposed a motion to impeach President Yoon Seok yeol for the failed implementation of martial law. However, Yoon Seok yeol's political party vowed to oppose this move, casting doubt on the impeachment process.

The Congress may vote on the bill as early as Friday. The ruling party, the National Power Party, led by Yin Xiyue, has stated that it will oppose the proposal, but there have been disagreements within the party regarding its stance on the crisis. The opposition Democratic Party has a majority in Congress and needs the support of at least eight ruling party members to pass the impeachment motion.

Kim Seung won, a member of the Democratic Party, said at the South Korean National Assembly meeting in the early hours of Thursday that "the declaration of emergency martial law by the Yin Xiyue regime has caused great chaos and fear to our people."

When the motion was proposed, none of the 108 ruling party members were present. Previously, the armed forces forcibly entered the Seoul National Assembly building, but they had to retreat after congressional assistants sprayed them with fire extinguishers.

The power of President Yoon Suk yeol should be immediately suspended. He has committed an indelible and historic crime against the people, and their anxiety needs to be appeased so that they can return to their daily lives, "Kim said.

If the impeachment case is passed and supported by the Constitutional Court, Yoon Suk yeol will become the first since former President Park Geun hye in 2017

Two impeached South Korean presidents. At that time, the large-scale candlelight protests and marches triggered by the scandal of cronies' involvement in politics led to Park Geun hye's resignation.

Yoon Seok yeol suddenly declared nationwide martial law late on Tuesday, attempting to ban political activities in South Korea and censor the media. South Korea is the fourth largest economy in Asia and an important ally of the United States. This shocking move led to a cabinet split and sparked six hours of political chaos in South Korea. On Wednesday evening, protesters held a candlelight vigil in Seoul, demanding the resignation of Yoon Seok yeol. The impeachment motion against Yin Xiyue paves the way for a vote to be held within the next 24 to 72 hours.

The opposition party needs a two-thirds majority to pass the impeachment motion. If passed, the South Korean Constitutional Court will decide whether to support the impeachment case, a process that could take up to 180 days.

If Yoon Seok yeol is suspended from exercising his powers due to the passage of the bill by the National Assembly, Prime Minister Han Deok soo will take over the presidency. If a struggling president resigns or is dismissed, new elections will be held within 60 days

The French parliament has passed a motion of no confidence to overthrow the Barnier government, deepening the political crisis

French opposition lawmakers overthrew the government on Wednesday, further plunging the EU's second-largest economic power into a political crisis that threatens the country's ability to legislate and control a huge budget deficit.

Far right and left-wing lawmakers joined forces to support a motion of no confidence against French Prime Minister Barnier and his government, with 331 lawmakers (more than half) voting in favor. It is expected that Barnier and his government will soon submit their resignation to President Macron.

Since the Pompidou government in 1962, no French government has failed in a vote of confidence. Macron called for a temporary election in June, which resulted in a polarized parliament and triggered this crisis. With the weakening of presidential power, France now faces the risk of no stable government by the end of the year or next year's budget, despite the constitution allowing for special measures to avoid a US style government shutdown.

France's left and far right punish Barnier for choosing to use the special powers granted by the constitution to forcibly pass a portion of an unpopular budget without a final vote, which seeks to save 60 billion euros in an effort to reduce the deficit.

Le Pen, leader of the far right National League, said earlier that the collapse of the government was "the only way the Constitution gives us to protect the French people from dangerous, unfair and punitive budgets".

France is currently facing serious political uncertainty, which has made investors in the country's government bonds and stocks uneasy. Earlier this week, France's borrowing costs briefly exceeded Greece's, which is typically considered to be more risky.

Macron must make a choice now. Three sources said that Macron's goal is to quickly appoint a new prime minister, with one source stating that he hopes to appoint a prime minister before the reopening ceremony of Notre Dame Cathedral on Saturday. US President elect Trump will attend the reopening ceremony.

Any new prime minister will face the same challenge as Barnier, which is how to pass bills including the 2025 budget in a divided parliament. France cannot hold new parliamentary elections before July. Macron can also demand that Barnier and his ministers remain in their positions as caretaker governments, while spending time searching for a prime minister who can attract enough bipartisan support to pass legislation.

The caretaker government can propose emergency legislation to extend the tax and expenditure provisions in the 2024 budget to next year, or exercise special powers to pass the 2025 budget draft in the form of a decree - but legal experts say this is a legal gray area and the political cost will be enormous.