- XAU/USD plunges, losing 1.68%, as rate hikes and rising bond yields make gold less attractive.
- US Nonfarm Payrolls beat estimates with 253,000 new jobs, pushing Treasury yields higher.
- Demand for gold falls in the first quarter of 2023 as central bank and Chinese consumer purchases are offset by investor purchases.
The price of Gold falls sharply while the XAU/USD no manages to hold its gains near the high of $2081.46 as two major central banks raised rates, boosting Treasury yields. In addition, a better than expected jobs report in the United States (US), triggered a jump in US Treasury yields. At the time of writing, the XAU/ USD is trading at $2,015.51, losing 1.68% from its opening price.
Gold recovery dampened by US data and low demand
US stocks continued to recover some ground after the US banking turmoil took a toll on sentiment. The US Department of Labor released non-farm payrolls for April, which showed the labor market remains tight, with the economy adding 253,000 jobs, crushing forecasts of 180,000. Furthermore, the report revealed that wages are rising, as shown by average hourly earnings rising 0.5% MoM, above forecasts of 0.3%, while the unemployment rate continued to fall past 3.5%, in 3.4%.
The XAU/USD pair tumbled after the US jobs data release, trading from $2,038 to $2,007, but later broke below the $2,000 figure, hitting a three-day low. This was due to short-term futures traders matching the Federal Reserve (Fed) rate cuts, as seen in soaring US Treasury yields following the NFP report.
Yields on 2-year and 10-year US Treasury bonds are up sharply 19 and 9 basis points each, yielding 3.924% and 3.443%, respectively. Despite the above, the dollar continues to fall under pressure, posting modest losses.
The Dollar Index (DXY), which measures the performance of six currencies against the USD, fell 0.15% to 101.25.
Lately, the president of the Federal Reserve Bank of St. Louis, James Bullard, commented that a soft landing is possible, adding that the labor report was “impressive.” Bullard said he is open to raising or holding rates at the next FOMC meeting in June, as he has embraced the “rely on the data” stance. Still, Bullard believes rates need to “go higher.”
Another reason weighing on XAU/USD prices is that global gold demand fell during the first quarter of 2023, as large purchases by Chinese central banks and consumers were offset by investor purchases, as reported by the World Gold Consortium (WGC).
Upcoming events
The schedule is quite light, with Fed Governor Lisa Cook due to make remarks.
XAU/USD Daily Chart
After hitting a new high, XAU/USD pulled back below the 61.8% Fibonacci retracement level and fell within $2 of reaching the 78.6% Fibonacci level. However, Gold bounced from its daily low of $1,999.57, above the 61.8% Fibonacci retracement at $2,015.26. It should be noted that the relative strength index (RSI) remains in bullish territory, although it is moving downward. The 3-day RoC has turned neutral, a possible sign that buyers are booking profits ahead of the weekend.
For a bullish continuation, XAU/USD buyers must recapture the 50% Fibonacci at $2,028. A break above will expose the 38.2% Fibonacci retracement at $2,040.60 before clearing the way to fresh highs. Conversely, a drop below $2,000 would reveal a month-old support trend line in the $1,970-$80 area.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
