- Gold price trades flat around $3,310 in Monday’s early Asian session.
- US NFP increased by 139,000 in May, more than expected; Unemployment Rate held steady at 4.2%.
- The US-China trade talks will be the highlight later on Monday.
The Gold price (XAU/USD ) trades on a flat note near $3,310 during the early Asian session on Monday. The rebound in the US Dollar (USD) could weigh on the precious metal. However, uncertainty from US President Donald Trump’s tariff policies might help limit the Gold’s losses.
Stronger-than-expected US jobs growth in May lifts the Greenback and undermine the USD-denominated commodity price. Nonfarm Payrolls (NFP) in the United States (US) climbed by 139,000 in May compared to the 147,000 increase (revised from 177,000) in April, the US Bureau of Labor Statistics (BLS) revealed on Friday. This reading came in above the market consensus of 130,000.
The US Unemployment Rate held steady at 4.2% in May, while the Average Hourly Earnings remained unchanged at 3.9% in the same reported period. Both readings came in stronger than the market expectation.
Following the upbeat US job report, Federal Fund Futures pointed to a larger chance that the US Federal Reserve (Fed) may keep its benchmark interest rate steady at its next two monetary policy meetings.
Investors will closely monitor trade talks between the US and China later on Monday, as Trump said that the world’s two largest economies will hold trade talks in London. Any signs of an escalating trade war between the US and China might boost the safe-haven flows, benefiting the yellow metal.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.