Gold prices (XAU/USD) have extended their rally, reaching a record high around $2,165 during the early European session on Friday. The precious metal is buoyed by a weaker US Dollar (USD), declining US Treasury bond yields, and growing expectations of an impending rate cut by the Federal Reserve (Fed) in its June meeting.
Support for gold is further amplified by the dovish stance of central bank policymakers. Fed Chair Jerome Powell’s indication that the central bank is close to gaining confidence in reaching its 2% inflation target, paving the way for interest rate reductions, has created a favorable environment for the yellow metal.
Investors are closely monitoring the US Nonfarm Payrolls (NFP) data, set for release on Friday, which is expected to reveal the addition of 200,000 jobs to the US economy. However, an outcome stronger than anticipated could lift the Greenback, potentially exerting some downward pressure on gold prices.
European Central Bank (ECB) President Christine Lagarde has hinted at possible policy easing in the June meeting. While the ECB maintained its benchmark rate at 4.0% in its March meeting, a downward revision of the inflation forecast for 2024 from 2.7% to 2.3% suggests openness to future rate cuts.
The surge in gold prices is not only a response to economic indicators but also influenced by Chinese investors seeking a safe haven amidst turmoil in the Chinese property sector and stock markets. Additionally, escalating geopolitical tensions in the Middle East contribute to the demand for traditional safe-haven assets.
Gold traders are keeping a close eye on the Eurozone Gross Domestic Product (GDP) for the fourth quarter. In the US, the release of February labor market data, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings, will guide traders in finding opportunities around the gold price.
