Gold Climbs Despite Surging Treasury Yields, USD

Despite Monday’s strong US dollar, gold prices managed to recover some of the losses from last week, rising by more than 0.5%. Following Friday’s US Nonfarm Payrolls report, which showed a robust labour market with 272,000 jobs gained beyond estimates, gold is rising.

On the other hand, future US inflation data and Federal Reserve actions are probably going to have a big influence on the direction of gold.

Gold Reports Gains Despite Rising Yield, But Faces Challenges: A rise in US Treasury yields on Monday contributed to a more than 0.5% increase in gold prices. Although the precious metal has bounced back from its low of $2,277 last week, it is still under pressure because of the general strengthening of the US Dollar ahead of important US economic data releases. The price of XAU/USD is currently $2,311.

NFP Raises Questions for Fed Policy

Despite earlier signs of a slowdown, last week’s US Nonfarm Payrolls report showed a stronger-than-expected labour market. 272,000 more employment were created than were projected—a difference of 185,000. Alongside a minor gain in average hourly earnings, the data also revealed a slight increase in the unemployment rate.

Focusing on US Inflation Data for Gold’s Next Step

The US inflation figure released this week has a big impact on the gold market. The majority of observers believe that inflation will stay at current levels, which might support the Fed’s decision to keep interest rates higher for an extended length of time. On the other hand, an abrupt spike in inflation might force the Fed to modify its language, which might cause gold prices to drop even lower.

Looming Fed Policy Decision and SEP Update

Following the inflation report, the Federal Reserve will announce its monetary policy decision and provide an updated Summary of Economic Projections (SEP). Any hawkish shift in their message or the dot plot could trigger volatility in the market.

Treasury Yields and Dollar Uptrend Add Pressure

The Federal Reserve will provide an updated Summary of Economic Projections (SEP) and announce its monetary policy decision after the inflation report. Any change in the dot plot or their message that leans hawkishly could cause market turbulence.

Pressure Increases from Treasury Yields and Dollar Uptrend

Gold prices were hampered in the interim by a three-and-a-half basis point increase in the yield on US 10-year Treasury notes to 4.47%. As a result, the US Dollar index, or DXY, increased by 0.23% to 105.17.

Chinese Gold Purchases Paused

The People’s Bank of China (PBOC) has been buying gold for eighteen months, and the news of this development put additional pressure on the precious commodity. The PBOC’s holdings for May stayed at 72.80 million troy ounces.

Expectations for US Inflation and Fed Rates

The headline US CPI rate for May is predicted to be 3.4% year over year, while the core CPI is predicted to decrease little from 3.6% to 3.5% year over year in the upcoming report.
The US jobless figures from last week increased expectations that the Fed would keep interest rates higher for an extended period of time. The likelihood of a Fed rate cut in September has dropped from above 50% to 46.7%, per the CME FedWatch Tool.

The 2024 fed funds futures contracts that were traded in December suggest that investors believe the Fed will decrease rates by 28 basis points during the course of 2024.

Technical Analysis: Gold Holds Despite Bearish Trend

According to technical analysis, gold prices are now rising and circling $2,310. The Head-and-Shoulders chart pattern may have appeared, but gold has been able to stabilise above $2,300. A shift towards negative momentum is shown by the Relative Strength Index (RSI).