Gold Falls from Two-Week Peak as Dollar Strengthens and Markets Await US Data
Gold prices (XAU/USD) weakened early in the Asian session on Monday (May 1), retreating from a two-week peak of around $4,515 touched on Friday. This weakening occurred as the US dollar strengthened again, increasing pressure on gold.
The dollar's strength stems primarily from two factors: demand for safe haven assets amid geopolitical uncertainty and expectations of a still-hawkish Fed stance. These two factors typically make gold less attractive because it offers no yield, while the dollar and yield-based assets benefit.
Despite the decline, gold remained above $4,500. The market appears to be holding back as it awaits clarity on the direction of US-Iran diplomacy, which so far remains uncertain and has yet to produce a decisive outcome.
From Iran, Foreign Minister Abbas Araqchi stated that communications and talks are ongoing, but he cautioned the market against overreacting to unconfirmed reports. On the other hand, there are signs of a hardening of negotiating positions, with sensitive issues such as Iran's nuclear program, the Strait of Hormuz, and enriched uranium remaining sticking points.
Regional tensions have also not subsided. A Reuters report suggests Israel is expanding its ground operations in Lebanon, which is keeping the geopolitical "risk premium" intact. At the same time, the recovery in oil prices from a more than month-low has also revived inflation concerns, which could strengthen the Fed's interest rate bets and support the dollar.
Looking ahead, market attention is focused on the US ISM Manufacturing PMI (Monday) and, especially, the Nonfarm Payrolls (NFP) (Friday). These two releases have the potential to alter interest rate expectations, move yields and the dollar, and determine whether pressure on gold continues or subsides—amidst the risk of Middle East headlines that could trigger volatility at any time.
Here are 5 key points:
- Gold retreated from a two-week peak around $4,515 as the dollar strengthened.
- Geopolitical risks boosted demand for the USD as a safe haven, limiting gold.
- Progress on US-Iran talks remains unclear; the Strait of Hormuz and uranium remain key issues.
- Israeli escalation in Lebanon maintains geopolitical risk premiums.
- US data (ISM and NFP) are the main drivers for the direction of the dollar, yields, and gold. (asd)
Source: Newsmaker.id
