Gold prices surged to a peak of $2,310 but were unable to surpass the high from May 2, reaching $2,326. The reversal of gains came as a result of the US Bureau of Labor Statistics revealing that April’s Nonfarm Payrolls missed expectations, leading to lower real yields and diminishing safe-haven appeal for Gold. The XAU/USD trades around $2,300, with Wall Street’s optimistic mood weighing on the non-yielding metal’s safe-haven appeal.
The Institute for Supply Management reported that business activity in the services sector in the US contracted for the first time since December 2022, contributing to a Goldilocks scenario following the NFP report. While the US Treasury yields are sliding, with the 10-year benchmark note down seven basis points, Gold prices remain underpinned by lower US Treasury yields and a softer US Dollar. The Gold prices failed to crack the high from May 2, retracing to current spot prices.
Federal Reserve officials have been offering mixed signals, with Fed Governor Bowman expressing readiness to hike rates if inflation stalls or reverses. The release of the April’s Nonfarm Payrolls revealed that the economy added only 175,000 jobs, below forecasts of 243,000 and March’s revised 315,000. Additionally, the Unemployment Rate increased slightly to 3.9%, and Average Hourly Earnings grew by only 0.2%, falling short of the expected 0.3%.
Gold prices remain upwardly biased, with momentum favoring a resumption of the uptrend despite trading within a range of $2,280 to $2,340. If XAU/USD remains above $2,300, the resistance levels would be at $2,330, $2,352, and higher levels such as $2,400, $2,417, and the all-time high of $2,431. On the other hand, a bearish continuation could occur if Gold prices drop below $2,300, leading to a pullback toward the daily low of $2,291 and further losses beneath the support at $2,223 and $2,200.
Gold has historically played a significant role in human history as a store of value and medium of exchange. It is also widely considered a safe-haven asset, a hedge against inflation and depreciating currencies. Central banks are the largest holders of Gold, often diversifying their reserves to improve the perceived strength of the economy and currency. The inverse correlation between Gold and the US Dollar, US Treasuries, and risk assets makes the precious metal a popular choice for investors in times of uncertainty.
Overall, Gold prices are influenced by a variety of factors, including geopolitical instability, economic recessions, interest rates, and the behavior of the US Dollar. As a yield-less asset, Gold tends to rise with lower interest rates and depreciating currencies. However, a strong Dollar can control Gold prices, while a weaker Dollar can push prices higher. Gold’s safe-haven status and its role as a hedge against inflation make it a valuable asset for investors seeking stability in turbulent times.
