Gold Prices Fall, This One Data Item Could Turn Gold Around!
Gold prices weakened at the start of the week and remained under pressure below US$4,700 in the Asian session, as the US dollar strengthened. Demand for the dollar as a safe-haven asset increased after US-Iran tensions re-escalated, while gold lost its short-term upward momentum.
Optimism about a US-Iran peace deal quickly faded after both sides rejected a peace proposal amid a dispute over Iran's nuclear program. Uncertainty regarding the Strait of Hormuz again increased the geopolitical risk premium, but safe-haven flows were more concentrated in the dollar, creating a drag on gold.
At the same time, rising oil prices reignited inflation concerns. The combination of energy inflation and solid US jobs data reinforced expectations that the Fed's policy stance would remain hawkish, which typically supports the dollar and puts pressure on gold as a non-yielding asset.
The latest jobs data showed that the April Nonfarm Payrolls (NFP) rose by 115,000, with unemployment at 4.3%. The market also assessed the possibility of an interest rate hike, with FedWatch indicators suggesting a greater than 20% probability of at least one 25 bps hike by year-end—creating fundamental pressure on gold.
However, market players tend to hold large positions ahead of this week's key data releases, particularly the US CPI and PPI, as well as Retail Sales, and comments from FOMC officials. As long as the dollar remains strong and interest rate expectations remain tight, gold's short-term bias remains defensive, while any rally above the US$4,700 area is potentially limited.
5 key points:
- Gold weakened and held below US$4,700 as the dollar strengthened.
- US-Iran tensions escalated again; peace negotiations stalled, and the risk of Hormuz returned to the forefront.
- Oil rose, fueling inflation concerns, reinforcing expectations that the Fed will remain hawkish.
- US data: NFP +115,000, unemployment 4.3%; the market still sees a 25 bps hike likely by year-end.
- The market is awaiting CPI, PPI, Retail Sales, and FOMC comments for the next direction in the dollar and gold. (asd)*
Source: Newsmaker.id
