Global gold prices witnessed significant fluctuations during Monday’s trading, as a result of US economic data that turned commodity markets upside down. A report on employment in the United States was published last Friday, which surprised markets with its strength. The data showed significant growth in non-farm payrolls, which strengthened the US dollar and led to an increase in its value. This situation greatly affected gold, which pushed the yellow metal down after a period of relative stability.
The impact of this report was rapid, as it pressured gold due to the fluctuations it caused in financial markets. The data showed that the US economy is still clearly resilient, which supported the conservative stance of the Federal Reserve. Expectations for Fed policies have become more hawkish, which raises the value of the dollar and reduces the attractiveness of gold, which is priced in dollars.
The employment report and its impact on markets
The report issued on Friday showed that the US economy added more than 300,000 new jobs last month, which greatly exceeded expectations. This is a positive indicator of the continued strength of the US economy, especially in the non-agricultural sector. Based on these results, markets have begun to adjust their expectations about the future interest rate policies of the Federal Reserve. The data showed that the Federal Reserve may remain cautious about cutting interest rates.
The Fed’s stance was supported by statements by US President-elect Donald Trump, who confirmed that he will seek to impose significant increases in customs tariffs. This trend may lead to further inflationary pressures, which further complicates the picture for the Federal Reserve’s policies. It seems that these policies will lead to higher interest rates, thus reducing the attractiveness of gold as a hedge against inflation.
The rise of the dollar and its pressure on gold
The strong jobs report drove a significant rise in the value of the US dollar. Investors found the dollar more attractive following this data, which made the precious metal, priced in dollars, less appealing to foreign buyers. Typically, gold moves inversely to the dollar, with prices dropping when the dollar strengthens.
Although many view gold as a safe-haven asset during market volatility, the dollar’s rise pushed prices lower. These developments suggest that gold could face further pressure if the dollar continues its upward trajectory.
Focus on upcoming inflation data
Amid these developments, the market’s focus now turns to the US inflation data due this week. Expectations are that inflation may reach high levels, which in turn will influence the decisions of the Federal Reserve. In this context, it will be important to follow any signs of a slowdown in the US economy, as these signs may reduce the rise in the dollar and bond yields.
Inflation is closely linked to gold, as investors prefer gold as a hedge against rising commodity prices. Therefore, if there are signs of slowing inflation.
Interest Rate Expectations
Based on recent data, traders seem to be expecting the Federal Reserve to keep interest rates steady at its meeting this month. Many believe that the Fed will take a cautious stance as jobs continue to grow, reflecting the continued economic recovery in the United States.
On the other hand, some expect the Federal Reserve to cut interest rates later in the year, perhaps in June, which could boost demand for gold. XAU is highly sensitive to interest rates, as higher rates reduce the attractiveness of gold as an investment, while lowering them has the opposite effect.
Gold as a Hedge Against Inflation
Gold is a safe haven asset that investors turn to to protect their money from the effects of inflation. However, with interest rates rising in the United States, investors are beginning to re-evaluate the appeal of gold. Higher interest rates increase the cost of holding gold, which does not generate returns, so assets that provide fixed returns become more attractive.
Preparing for a new wave of uncertainty
According to analysts at ANZ Bank, investors appear to be preparing for a new wave of uncertainty, especially with the inauguration of US President-elect Donald Trump and the implementation of his economic policies. The new policies will likely raise concerns in financial markets, increasing pressure on gold. All eyes are on the impact of these policies on global markets, especially in light of expectations of increasing tariffs on imports.
Price review in precious metals markets
As for other metals, some precious metals also witnessed declines in prices. Silver fell by 0.6% to reach $30.21 per ounce, while platinum decreased by 0.4% to record $960.54 per ounce. Palladium settled at $947.40 per ounce. This shows that the pressure on gold has extended to other precious metals, as a result of the continued rise in the value of the US dollar.
Gold at the end of last week
At the end of trading on Friday, gold was able to achieve gains, to enhance its gains for the second week in a row. The prices of gold futures for February delivery rose by 0.9%, or $24.2, to reach $2,715 per ounce. This rise reflects the growing concerns about inflation in the United States, especially in light of the decline in consumer confidence for the first time in six months.
