In the early New York session on Friday, the price of gold (XAU/USD) surged to a fresh all-time high, surpassing $2,180. The rally was fueled by a drop in yields on 10-year US bonds, which fell to 4.04% following the release of the US Nonfarm Payrolls (NFP) data. A notable slowdown in wage growth and an increase in the Unemployment Rate are anticipated to shape market expectations, leading to speculation about a potential interest rate reduction by the Federal Reserve (Fed) in the upcoming June policy meeting.
The United States Bureau of Labor Statistics (BLS) reported a rise in the Unemployment Rate to 3.9%, exceeding expectations and marking an increase from the previous reading of 3.7%. Although Nonfarm Payrolls for February surpassed expectations at 275K against the projected 200K, the figure remained lower than the prior reading of 353K.
The inflation outlook is expected to ease, driven by slower growth in Average Hourly Earnings compared to market expectations. Monthly wages experienced a modest increase of 0.1%, contrasting with a 0.6% rise in January. Investors had anticipated a 0.3% growth in wage rates. Additionally, annual wage growth decelerated to 4.3%, falling short of expectations and the prior reading of 4.4%. Notably, January’s wage growth has been revised down from 4.5%.
Concurrently, the combination of sluggish wage growth and a higher jobless rate has intensified selling pressure on the US Dollar. The US Dollar Index (DXY), tracking the Greenback’s performance against six major currencies, hit a seven-week low around 102.40.
During the European session, gold continued to exhibit strength as Federal Reserve Chair Jerome Powell signaled that the central bank is nearing the evidence required for inflation to sustainably return to the 2% target. Powell stated during his two-day testimony before Congress, “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”
The confluence of factors, including economic data, Fed signals, and global market dynamics, has propelled gold to new heights, with investors closely monitoring developments that could impact the precious metal’s trajectory in the coming weeks.
