During early European trading hours on Thursday, the price of gold (XAU/USD) showed a slight upward bias but struggled to extend gains beyond a recent two-week high reached the previous day. The prevailing bullish sentiment in global equity markets acted as a deterrent for the safe-haven metal, despite reduced trading volumes due to the US Independence Day holiday.
Market participants exhibited caution, awaiting the release of the highly anticipated US Nonfarm Payrolls (NFP) report on Friday before committing to significant directional positions. This data is pivotal for shaping expectations around future Federal Reserve policy decisions.
On the downside, gold prices found support from growing expectations that the Federal Reserve will initiate interest rate cuts later this year. These expectations were reinforced by recent soft US economic indicators, including labor market weakness and signs of economic slowdown highlighted in the minutes of the latest Federal Open Market Committee (FOMC) meeting. The resultant decline in US Treasury bond yields and the US Dollar’s retreat to a three-week low further bolstered the appeal of the non-yielding precious metal.
The interplay of these factors suggests that while gold faces resistance from upbeat equity markets, underlying economic concerns and dovish Fed expectations continue to provide a supportive backdrop for prices.
