The gold price is holding above $2,030 in Asian trading on Monday, showing signs of correction after a significant retreat from monthly highs reached on Friday. The US Dollar (USD) remains buoyed alongside US Treasury bond yields, driven by the robust US Nonfarm Payrolls (NFP) report and Federal Reserve (Fed) Chair Jerome Powell’s statements.
Geopolitical Tensions and Gold Price Dynamics:
The blowout US NFP report, revealing the addition of 353K jobs in January against the expected 180K, has tempered expectations for early Fed interest rate cuts. Fed Chair Jerome Powell’s recent interview further pushed back against the timing of rate cuts, emphasizing caution and a need for more confidence in the economy before considering such measures.
While the prevailing conditions favor the USD and bond yields, Gold finds potential support from escalating geopolitical tensions in the Middle East. US Central Command confirmed a strike in self-defense against a Houthi land attack cruise missile, prompting threats of extended military operations from the Iran-backed Yemeni Houthi group.
Potential Market Developments:
As the market positions itself with an 85% probability of the Fed maintaining interest rates next month and 65% odds of a rate cut in May, Gold remains in a downside consolidative phase. However, if geopolitical tensions escalate, the traditional safe-haven asset may attempt a rebound. Yet, the influx of safe-haven flows into the US Dollar could limit Gold buyers.
Traders are also awaiting key data releases, including the ISM Services PMI and S&P Global final Services PMI, for potential trading impetus on Gold price. The interplay between geopolitical developments, monetary policy expectations, and economic indicators is likely to shape Gold’s near-term trajectory.
