The gold market had limited gains yesterday, with the most active New York gold February futures contract closing at $2671.30, a decrease of approximately 0.18%. Market performance is influenced by the interaction of economic indicators, Federal Reserve comments, and constantly changing expectations of monetary policy.

The latest ADP employment report has become a key fundamental support for gold prices, showing that private enterprises added 146000 new jobs in November. This number has significantly decreased compared to the 233000 job positions last month, and is also lower than the consistent expectation of 163000 new positions by MarketWatch. Market participants are eagerly awaiting the release of the US non farm payroll report on Friday, which may provide further insights into the health of the labor market.

Complementing the employment data, US Treasury yields are showing a softening trend. The yield of 2-year US Treasury bonds fell 6 basis points to 4.218%, while the yield of 10-year US Treasury bonds fell 3.8 basis points to 4.19%. The moderate decline in yield provides some bullish support for gold prices.

The recent remarks made by Federal Reserve Chairman Powell at an event in The New York Times have brought considerable complexity to market sentiment. In his final speech before the Federal Open Market Committee (FOMC) meeting on December 18th, he stated that the current economic situation is stronger than the Fed's forecast for September. He emphasized the need to approach monetary policy with caution, with a focus on normalizing interest rates.

Powell's striking statement emphasized the strong state of the US economy: "The US economy is in very good condition, and there is no reason not to continue... The downside risk in the labor market seems small, and economic growth is definitely stronger than we imagined, with inflation rising a bit

Despite Powell's seemingly tough tone, the market consensus on the trajectory of the Federal Reserve's monetary policy remains largely unchanged. The Chicago Mercantile Exchange's Federal Reserve Watch tool shows a 77.5% chance of a 25 basis point rate cut this month, up from 66.5% last week and 72.9% the day before.

Looking ahead, the short-term forecast for the gold market remains cautious. As investors closely monitor the upcoming employment report, it is expected that the strengthening of the US dollar will play a key role in the gold price trend. Fawad Razaqzad from StoneX provides a balanced perspective, stating that a weaker than expected employment report may reignite hopes for a moderate Federal Reserve, which could boost gold prices. On the contrary, stronger than expected data may prolong the current market pressure.

New York Gold February Futures Daily Chart