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Gold prices steady despite uncertain US economic indicators

May 3, 2024

Gold prices are on track for a second consecutive weekly decline but remained stable on Friday morning at $2,301.49 per ounce as of 0215 GMT. The modest weekly loss of over 1% reflects a broader pullback from the record high of $2,431.29 reached earlier in April, with prices falling by $130 since that peak. U.S. gold futures saw a slight increase of 0.1%, reaching $2,311.20.

Influencing factors

The recent downturn in gold prices has been attributed to reduced geopolitical concerns and a recalibration of expectations around interest rates. The easing of geopolitical tensions, particularly with efforts led by Egypt to restart talks between Israel and Hamas, has contributed to a more stable outlook, diminishing the immediate appeal of gold as a safe haven.

The Federal Reserve’s meeting on Wednesday shed light on its cautious approach towards rate cuts, despite leaning towards eventual reductions. The persistence of disappointing inflation figures has prompted the Fed to adopt a watchful stance, impacting market expectations. Currently, the market reflects a 73% likelihood of a rate cut by November, according to the CME’s FedWatch Tool. This cautious anticipation affects gold, traditionally viewed as an inflation hedge, especially when high interest rates lessen its attractiveness relative to yielding assets.

Anticipation for non-farm payrolls report

The market is bracing for the non-farm payrolls report due at 1230 GMT, which could significantly sway Fed’s future decisions and thus influence gold prices. Ch A softer payroll report might bolster gold prices, whereas stronger employment data could exert further pressure on gold, with prices potentially oscillating between $2,280 and $2,340.

Precious metals performance

In other markets, spot silver dropped by 0.2% to $26.65 and is nearing a 2% decline for the week, hinting at a potential bullish reversal as it approaches the $25-$26 breakout area. According to market analyst Fawad Razaqzada from City Index, silver may find a solid footing around these levels and possibly register more gains this year. Meanwhile, platinum recorded a 0.9% rise to $957.15, indicating a positive trajectory for the week, and palladium also experienced a slight increase of 0.1% to $935.99.

As we monitor the fluctuations and trends within the precious metals market, particularly with gold’s response to economic indicators and policy decisions, there lies an opportunity for proactive trading.

Whether you’re looking to hedge against inflation, speculate on geopolitical developments, or diversify your investment portfolio, now is a strategic time to engage with the market.

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