Gold prices (XAU/USD) climbed nearly one percent into the $2,320s on Monday, propelled by market reactions to weaker-than-expected US jobs data and positive economic indicators from China, a crucial market for gold, while central bank demand remains robust.
The rebound in gold prices followed the release of Friday’s US Nonfarm Payrolls data from the Bureau of Labor Statistics, which reported that only 175,000 jobs were added in April, falling short of expectations. Moreover, wage inflation exhibited a slowdown, with Average Hourly Earnings declining both on a yearly and monthly basis compared to economist forecasts.
These underwhelming employment figures suggest a potential scenario where the Federal Reserve (Fed) might consider lowering interest rates sooner than anticipated. This prospect enhances the allure of gold as lower interest rates diminish the opportunity cost of holding the non-yielding precious metal.
Additionally, Chinese Caixin Services PMI data, published on Monday, indicated that the services sector maintained its expansionary trend in April, with a reading above 50. This positive data fuels hopes of sustained demand for gold in China despite recent economic challenges faced by the country.
In parallel, central banks continue to show strong interest in acquiring gold. Data from the World Gold Council (WGC) tracking central bank gold acquisitions in March revealed a net increase of 15 tonnes, underscoring central banks’ status as significant gold consumers in recent years.
Krishan Gopaul, Senior Analyst for EMEA at the World Gold Council, noted, “Buying strength has persisted into 2024, with emerging market banks driving both purchases and sales, contributing to the ongoing positive demand trend.”
The combined influence of US jobs data, Chinese economic indicators, and sustained central bank demand underscores the current bullish sentiment in the gold market, with investors closely monitoring these factors for potential impacts on gold prices moving forward.
