Gold prices took a downturn on Monday, relinquishing some of Friday’s gains and plunging more than 1% as risk appetite returned to the market. US equities registered gains, while US Treasury bond yields saw a slight decline. As of now, XAU/USD is trading at $2,358 after touching a daily high of $2,391.
The latest US Nonfarm Payrolls (NFP) report presented a mixed picture. While June’s figures surpassed expectations, downward revisions for April and May suggested a significant slowdown in the US job market. Consequently, the uptick in the US Unemployment Rate has fueled speculation that the Federal Reserve (Fed) might move to cut interest rates sooner than previously anticipated.
Gold prices were further pressured by the People’s Bank of China (PBoC)’s decision not to purchase Gold in June, extending a pause from May. As of the end of June, China held 72.80 million troy ounces of the precious metal.
Meanwhile, the yield on the US 10-year Treasury bond dropped nearly two basis points to 4.27%, indicating market expectations of potential Fed rate cuts to mitigate risks to the labor market.
According to data from the CME FedWatch Tool, investors are now pricing in a 73% probability of a Fed rate cut in September, up from 71% recorded last Friday.
Looking ahead, the US economic calendar will feature significant events including Fed Chairman Jerome Powell’s semi-annual Congressional Testimony, along with the release of inflation data from both consumer and producer perspectives. Initial Jobless Claims and the University of Michigan Consumer Sentiment index will also contribute to market sentiment and expectations.
