Gold prices (XAU/USD) experienced a continued decline through the first half of the European session on Monday, edging closer to a two-week low observed in the aftermath of positive US monthly employment data released on Friday. The well-received Nonfarm Payrolls (NFP) report indicated a resilient US labor market, prompting investors to readjust expectations for aggressive policy easing by the Federal Reserve (Fed). This adjustment has supported elevated US Treasury bond yields, acting as a driving force for the US Dollar and diverting capital away from the non-yielding precious metal.
Despite the apparent strength of the US Dollar, markets still indicate a significant probability of the first interest rate cut by the Fed at its March policy meeting, along with a cumulative expectation of five 25 basis points rate cuts throughout 2024. This hesitancy among USD bulls to place aggressive bets could offer some support to the Gold price. Additionally, a prevailing sense of risk aversion in the markets may act as a tailwind for the safe-haven gold.
Investors are exercising caution, choosing to stay on the sidelines ahead of the release of US consumer inflation figures scheduled for Thursday. Meanwhile, attention is focused on a scheduled speech by Atlanta Fed President Raphael Bostic, which may provide some impetus in the absence of relevant US macro data. The ongoing interplay between economic indicators, central bank decisions, and market sentiment will likely dictate the near-term direction of gold prices.
