Gold Prices Forecast: Will Rising Risk Appetite Suppress Gold Further?

Gold Trends Lower Despite Soft U.S. Employment Data

Gold prices declined for a second consecutive week, hitting a one-month low despite a weaker-than-expected U.S. jobs report, as geopolitical tensions diminished and profit-taking ensued. The precious metal saw a notable sell-off on Friday, closing the week on a downturn even as labor market data fell short of expectations, suggesting potential easing from the Federal Reserve could come sooner than anticipated.

Last week, XAU/USD settled at $2301.81, down $36.24 or -1.55%.

U.S. Jobs Data and Treasury Yield Movements

The U.S. economy added only 175,000 jobs in April, well below the anticipated 243,000, while the unemployment rate unexpectedly ticked up to 3.9%. These figures initially spurred a brief rally in gold prices, with XAU/USD peaking at $2,320.78. However, gains were short-lived as yields on U.S. Treasuries dropped, reflecting increased market expectations for a looser monetary policy stance. The 10-year Treasury yield fell by about 7 basis points to 4.5%, indicating a move away from risk-averse assets.

Federal Reserve’s Stance

Despite maintaining interest rates, the Federal Reserve’s recent statements have been closely watched for hints at future policy direction. Fed Chair Jerome Powell underscored the possibility of adjusting rates if the labor market continues to weaken, aligning with their dual mandate of stabilizing prices and maximizing employment. These remarks have heightened speculation among investors about the timing and extent of potential rate cuts.

Market Reaction and Outlook

The immediate market reaction to the soft jobs report was a shift towards riskier assets, notably equities, which detracted from gold’s appeal as a safe haven. Despite favorable conditions that typically boost interest in bullion, such as potential rate cuts, the move towards higher-yield investments was pronounced. This trend, coupled with an easing of tensions in the Middle East, suggests a cooling period for gold after its April surge.

Weekly Gold Market Forecast

Looking ahead, gold faces a bearish outlook in the short term if the trend towards risk-on sentiment continues and central banks globally adjust their policies in response to changing economic indicators. With the Fed possibly moving towards rate cuts later in the year, gold could see further downside unless Asian markets increase their buying or other geopolitical factors emerge to renew safe-haven demand. The upcoming decisions by the Federal Reserve and global economic developments will be critical in shaping gold’s trend in the coming weeks.