XAUUSD’ fate is in the hands of NFP data?

Gold prices have stabilized and are now consolidating within ~$2281-$2336 range ahead of the US Non Farm Payrolls (NFP) reading.

Despite Fed’s commentary on Wednesday (May 1) mentioning the remaining potential for a rate cut this year, bond yields have remained elevated, adding to the pressure on the zero-yielding gold.  

With inflationary risks still higher than originally anticipated, the much anticipated interest rate cuts may be delayed towards later in the year.

Currently, the markets are only pricing in a >50% chance of a rate cut in September 2024.

Higher-for-longer interest rates could hurt investment demand for the zero-yielding metal.

The world’s largest gold ETF (SPDR Gold Shares) lost $677.6 million USD (-1.10%) in total net asset value between April 30 and May 2.

Markets are now turning their attention towards key US macroeconomic to be released later today.

• Non Farm Payrolls (NFP): 238K – expected (303K – previous)
   
• Unemployment rate: 3.8% – expected (3.8% – previous)
   
• ISM Services PMI: 52.0 – expected (51.4 – previous)
   

Higher-than-expected NFP & ISM Services PMI readings may result in XAUUSD moving lower while the USD could potentially strengthen.

Higher-than-expected unemployment rate may signal a potential cooling of the economy. This may contribute to the highly anticipated interest rate cuts, which may support the XAUUSD.

The geopolitical landscape may also play a key role in determining the gold’s future price movements. Any geopolitical escalation in the Middle East and/or Eastern Europe could potentially push gold prices higher driven by safe-haven demand from investors.