Gold prices (XAU/USD) stalled around $2,295 during Monday’s early Asian trading session, relinquishing recent gains as investors turn their focus towards key events and Federal Reserve (Fed) commentary throughout the week. The looming release of the US Michigan Consumer Sentiment Index for May on Friday and Fed-related updates are expected to shape market sentiment.
Meanwhile, the US Dollar Index (DXY), which measures the USD against a basket of major currencies, rebounded to 105.12 from nearly one-month lows, exerting pressure on gold.
Last Friday’s US employment report revealed signs of economic moderation. Nonfarm Payrolls (NFP) for April increased by 175,000, marking a notable decline from the previous month’s revised figure of 315,000. This weaker-than-expected data, along with an uptick in the Unemployment Rate to 3.9% and a decline in Average Hourly Earnings by 3.9% year-on-year, contributed to a dampened outlook. Moreover, the ISM Services PMI fell into contraction territory at 49.4 for April, undershooting expectations.
Following the data release, market sentiment tilted towards expectations of potential rate cuts by the Fed, with traders pricing in a 38-basis-point reduction by year-end. Gold briefly surged to $2,320 in response to the lackluster economic figures but retraced gains after hawkish remarks from Fed officials.
Fed Governor Michelle Bowman’s recent interview conveyed a hawkish tone, suggesting readiness to raise rates if inflation shows signs of stalling or reversing. Additionally, Chicago Fed President Austan Goolsbee characterized the employment report as solid, indicating that current monetary policy is restrictive.
These statements, coupled with an overall risk-on sentiment in the market, tempered demand for non-yielding assets like gold. As the week progresses, market participants will closely monitor Fed commentary and economic indicators for further insights into the monetary policy outlook and its impact on gold prices.
