Gold prices fell slightly in Asian trade, retreating from two straight days of gains as investors sharply pared bets on a December interest rate cut by the Federal Reserve.

Safe haven demand was pressured by a broad rebound in global equity markets, following positive earnings from bellwether Nvidia Corp. 

Focus was now squarely on U.S. nonfarm payrolls data due later in the day, which is expected to offer more cues on the labor market.

Persistent concerns over stretched fiscal spending in the developed world offered some support to gold, especially as Japanese government bond yields continued to push higher. A  growing diplomatic row between China and Japan also buoyed haven demand. 

Spot gold fell 0.2% to $4,070.27 an ounce, while gold futures for December fell 0.3% to $4,069.09/oz by 00:15 ET (05:15 GMT). 

Gold stalls rally as Dec rate cut bets fall further 

Gold’s rally paused on Thursday after the yellow metal added over 1% in the past two sessions.

This came amid waning confidence that the Fed will cut interest rates in December. This came to a head on Wednesday, as the minutes of the Fed’s October meeting showed policymakers growing increasingly divided over whether to cut rates further. 

Markets are now pricing in a 21.5% chance the Fed will cut rates by 25 basis points during its December 10-11 meeting, nearly half of the 42.4% probability seen on Wednesday, CME Fedwatch showed. 

The Fed is seen going blind into December’s meeting due to delays in official economic data from a prolonged government shutdown, making a cautious hold more likely. 

But high for longer U.S. interest rates tend to pressure non-yielding assets such as gold. 

Other precious metals rose on Thursday after losing ground in the prior session. Spot platinum rose 0.8% to $1,560.13/oz, while spot silver steadied at $51.3415/oz. 

Payrolls data awaited for more cues 

Focus was now squarely on the release of long-awaited U.S. nonfarm payrolls data for September, which is due later in the day.

While the print is unlikely to factor into the Fed’s December decision, it is still expected to offer definitive cues on the labor market. Release of the print was delayed by a prolonged government shutdown, while government officials signaled that payrolls data for October was unlikely to ever be released. 

A host of private readings, as well as jobless claims data released this week, showed the U.S. labor market was steadily weakening. This trend could set the Fed up for an eventual rate cut, given that preventing labor market weakness is one of the bank’s main priorities.

But sticky inflation is expected to keep the Fed from loosening monetary policy too drastically.