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Gold rises due to rate cut speculation and economic data

May 10, 2024

Key points:

  • Gold prices increased this week, influenced by expectations of a Federal Reserve rate cut later this year.
  • Recent U.S. labor market data suggests a cooling economy, further fueling rate cut speculations.

10th May 2024 – On Friday, spot gold experienced a slight increase of 0.1% to $2,347.98 per ounce, contributing to a 2% rise over the week.

Candle chart depicting slight upward rise of XAUUSD on the VT Markets trading app

SEE: Gold sees slight upward rise on the VT Markets trading app.

This upward movement is closely tied to traders’ adjusted expectations for an interest rate cut from the Federal Reserve, anticipated to begin as early as September. U.S. gold futures also reflected this optimism, rising 0.6% to $2,354.10.

Gold prices shift due to US economic data

The shift in market sentiment was largely prompted by the latest U.S. economic data released on Thursday, which showed an unexpected rise in new unemployment claims. This data is seen as a sign of a cooling labour market, reinforcing the case for upcoming rate cuts.

The financial markets are now keenly awaiting the University of Michigan’s consumer sentiment index and next week’s consumer price index data, which could provide further insights into the economic trajectory and influence Fed decisions.

Inflation and monetary policy

San Francisco Fed President Mary Daly’s comments added depth to the market’s understanding, noting “considerable” uncertainty about the future path of U.S. inflation but maintaining optimism that inflationary pressures were easing.

Such statements play a crucial role in shaping market expectations regarding the Fed’s monetary policy approach in the coming months.

You might like: 4 reasons why traders flock to safe-haven gold during global political tensions

Market shifts

Tensions in the Middle East continue to influence market sentiment. A senior Israeli official indicated that the latest negotiations in Cairo aimed at halting hostilities in Gaza had concluded without an agreement.

This suggests, at least in perception, continued regional instability which historically increases market preference for safe-haven assets like gold.

In the broader precious metals market, spot silver slightly declined by 0.1% to $28.31 per ounce, though it is still on track for its best week in five. Platinum and palladium also saw gains, with platinum rising 0.8% to $985.40 and palladium up by 0.1% to $968.25, both poised for weekly increases.

As gold prices respond to evolving economic data and geopolitical tensions, understanding these market dynamics becomes crucial for informed trading decisions. With key economic events on the horizon and continuous fluctuations in the precious metals market, now is an opportune time to engage in trading activities.

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