Gold meanders on resilient inflation and lasting war

2024-02-05
Summary:

Gold dropped on a strong US nonfarm payroll, boosting the dollar and Treasury yields. Traders see a 70% chance of a May rate cut, per CME Fed Watch.

Gold slipped on Monday as a rising dollar and Treasury yields were pushed higher by a strong-than-expected US nonfarm payroll. According to the CME Fed Watch, traders now expect about a 70% chance of a rate cut in May.

US employers added 353,000 jobs in January, beating the 180,000 economists had expected. A resilient economy and strong worker productivity encouraged businesses to hire and retain more employees.


Gold demand hit record highs in 2023 as persistent geopolitical tensions and weakness in China’s economy pushed investors toward the safe haven asset, the WGC said in report.


The report showed that the PBOC was the biggest buyer of gold at 225 tons last year, bumping up its stock to 2,235 tons. The country’s investments in gold bars and coins rose 28%.


Gold purchases this year are unlikely to meet 2023 levels, but a fall in inflation could prevent a drastic drop in demand. Bullion was slightly down this year due to slowing disinflation.


The Ukrainian government has informed the White House that it plans to fire the country's top military commander overseeing the war against Russia due to his incompetence, two sources said last week.

XAUUSD

Gold prices remain range-bound as expected with few catalysts leading to a breakout. Therefore, it is still justified to sell above $2,056 and buy around $2,000.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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