Gold price rises as markets increase their bets of interest rates coming down in the US. The Chinese Caixin services PMI data remains in expansive territory, supporting the outlook for a key market for Gold. Central bank buying of Gold remains strong in March, according to the World Gold Council.
The Gold price (XAU/USD) is trading up by almost a percent, in the $2,320s on Monday, as markets weigh the implications of weaker-than-expected US jobs data on interest rates – a key driver of Gold price – and economic data from China, a major market for Gold, stays in expansive territory.
Gold price rebounds on Monday as markets mull the outlook for interest rates in the light of recent US employment metrics. Friday’s US Nonfarm Payrolls data from the Bureau of Labor Statistics showed a below-estimated 175K people found work in April. More importantly, wage inflation showed a slowdown, with Average Hourly Earnings both on a yearly and monthly basis ticking down from where economists had expected. The weaker-than-expected data suggests the Federal Reserve (Fed) may lower interest rates sooner than had been anticipated. This scenario increases the attractiveness of Gold as lower interest rates reduce the opportunity cost of owning the non-yielding precious metal.
Chinese Caixin Services PMI data released Monday showed the sector remaining in expansive territory (above 50) in April, keeping alive hopes of buoyant demand for Gold in China despite the country’s recent economic woes.
According to data from the World Gold Council (WGC) tracking central bank acquisitions of Gold in March, buying showed a net positive of 15 tonnes from central banks, who have become one of the largest consumers of Gold in recent years. The figure was in line with previous months, keeping the positive trend in demand alive. Central banks from emerging economies such as China, India, and Turkey are quickly increasing their Gold reserves.
Gold price (XAU/USD) has started trading sideways on the 4-hour chart, which is used to analyze the short-term trend. The pair has just retested the ceiling of a mini-range at around $2,326, and has pulled back during the last period. Price could potentially pull back further and fall to the base of the range at around $2,280 or break out of the top of the range and start moving towards resistance at $2,353, which aligns with the top of the late April swing high and top of wave B.
Gold has played a key role throughout human history as a store of value and medium of exchange, and is now widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies. Central banks are the biggest Gold holders, adding 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022. Gold has an inverse correlation with the US Dollar and US Treasuries, as well as with risk assets. The price of Gold can move due to factors such as geopolitical instability, fears of recession, interest rates, and the behavior of the US Dollar.
