As Gold (XAU/USD) Hovers Above $2,000, All Eyes on US Inflation Figures
In the ever-volatile world of precious metals, Gold (XAU/USD) has managed to reclaim lost ground during early Asian trading hours on Monday. A surprising boost in the US labor market has prompted a climb in Treasury yields, momentarily dulling investors’ appetite for the yellow metal. Despite this, Gold is finding support near its two-week low of $1,995, and as of now, the price stands at a resilient $2,005, marking a 0.14% increase for the day.
Last Friday, the eagerly awaited US Nonfarm Payrolls (NFP) data for November exceeded expectations, with a rise of 199K from the previous 150K. Accompanying this positive trend, the Unemployment Rate dropped to 3.7% from 3.9% in the preceding report, while Average Hourly Earnings maintained stability at 4.0%, meeting market predictions.
Simultaneously, the preliminary University of Michigan Consumer Sentiment Index for December soared to 69.4, up from the previous 61.3. In response, the US Dollar Index (DXY) surged to 104.25, and 10-year US Treasury yields experienced an uptick from 4.15% to 4.28%.
As the Federal Reserve gears up for its last meeting of the year with an interest rate decision on Wednesday, market expectations suggest no alterations in rates for December. However, the dot plot is anticipated to see adjustments. Notably, after robust employment data, market projections for the first-rate cuts have shifted from March to May.
In the backdrop of a robust US Dollar and concerns over China’s deflation, Gold faces headwinds. The recent revelation by the National Bureau of Statistics of China, indicating a 0.5% YoY drop in the Consumer Price Index (CPI) for November, has only added to these challenges. The Producer Price Index (PPI) for the same period dipped 3.0% YoY, worse than the market consensus of a 2.8% decline.
Looking forward, all eyes are on the US Consumer Price Index (CPI) on Tuesday, with the Federal Open Market Committee (FOMC) meeting following on Tuesday and Wednesday. Investors and traders are poised to glean insights from these events, steering their strategies in response to the unfolding dynamics in gold prices. The anticipation is palpable, hinting at a potential new gold rush on the horizon.