Gold Price Softens Near $2,295
Gold price (XAU/USD) is trading on a softer note near $2,295 on Monday as investors monitor Fedspeaks scheduled for this week. Alongside this, the first reading of the US Michigan Consumer Sentiment Index for May on Friday will also be in focus. The US Dollar Index (DXY) has edged higher to 105.12, rebounding from nearly one-month lows.
Weaker US Employment Data
The US Employment data released on Friday indicated some signs of a slowing economy. The Nonfarm Payrolls (NFP) for April came in at 175K, down from the 315K rise recorded in March and weaker than the expected 243K. This marks the smallest gain since October 2023. Additionally, the Unemployment Rate ticked up to 3.9%, and Average Hourly Earnings declined by 3.9% YoY in April. The ISM Services PMI also fell into contraction territory at 49.4 in April, below market expectations.
This data release prompted an increase in the probability of a Federal Reserve (Fed) rate cut, with traders now anticipating a 38 basis points (bps) cut by the end of the year. Gold initially climbed to $2,320 in response to the weak US economic data but later retraced its gains after hawkish comments from Fed officials.
Fed Official’s Hawkish Stance
Fed Governor Michelle Bowman expressed willingness to raise rates further if inflation progress stalls or reverses, indicating a hawkish stance. On the other hand, Chicago Fed President Austan Goolsbee viewed the latest US employment report as solid and suggested that the current monetary policy is restrictive. These contrasting views from Fed officials, coupled with a risk-on sentiment, have reduced the appeal of non-yielding metals like gold.
Additional Insight: It is essential for investors to carefully monitor Fed officials’ comments as they can provide key insights into future monetary policy decisions. The contrasting viewpoints within the Fed can create uncertainty in the markets, impacting asset prices like gold. Investors should also pay attention to economic indicators like the US Michigan Consumer Sentiment Index for further clues on the health of the economy.
