During the early Asian session on Monday, the gold price (XAU/USD) has maintained a positive stance despite conflicting factors impacting the market. The release of an encouraging US jobs report has subdued expectations of a March rate cut, putting downward pressure on the precious metal. However, geopolitical tensions in the Middle East may act as a limiting factor for potential downside.
As of the latest update, the gold price is trading at $2,038, reflecting a modest gain of 0.12% for the day.
The upbeat US Nonfarm Payrolls (NFP) report on Friday exceeded expectations, revealing a surge to 353K jobs in January, up from 333K in December (revised up from 216K). The Unemployment Rate remained unchanged at 3.7%, and Average Hourly Earnings exhibited firm growth, increasing by 4.5% YoY in January, compared to 4.4% in December. The positive economic data prompted some buying interest in the Greenback, leading traders to reassess the likelihood of an interest rate cut in May. The CME FedWatch tool indicates a notable drop in the probability of a March rate cut, falling from 38% to 19% within a day.
The prevailing narrative of higher interest rates for an extended period diminishes gold’s attractiveness, as it offers no yield. Despite this, the gold market faces a potential cushion from escalating geopolitical tensions. Reports suggest that the United States and the United Kingdom executed large-scale military operations on Saturday against Houthi-controlled sites in Yemen. The Biden administration’s ongoing response to Iran-backed rebels in the Middle East could heighten uncertainties, providing support for traditional safe-haven assets like gold.
Looking ahead, market participants are keenly awaiting remarks from Fed Chair Jerome Powell, scheduled for late Sunday. Additionally, attention will be on key economic data releases, including the Chinese Caixin Services PMI and US ISM Services PMI on Monday. These events are likely to influence the direction of the gold price, offering insights into the market’s reaction amid the contrasting forces of economic indicators and geopolitical developments.
