Gold price fluctuates lower on declining safe-haven demand

LONDON (May 3) The Gold price (XAU/USD) edges lower on Friday, trading down to just above $2,300, as safe-haven demand for the precious metal diminishes amid an overall upbeat market mood. 

Gold price fluctuates lower as safe-haven demand softens

Gold price fluctuates lower as market sentiment remains positive on Friday, tempting investors away from the safe and secure. Asian stocks followed Wall Street higher overnight after investor fears that the Federal Reserve (Fed) might threaten to raise interest rates eased. 

The Fed’s May policy meeting on Wednesday reflected an easing bias amongst Fed committee members who decided to slow down quantitative tightening by reducing their holdings of US Treasuries at a slower rate. In his press conference after the meeting, Federal Reserve Chairman Powell also stated that it was “unlikely” the central bank would raise interest rates despite persistent inflation. 

Whilst expectations that US interest rates are not likely to rise helped Gold price immediately after the meeting because of its condition as a non-yielding asset, the good feeling that followed in broader global markets curtailed a key source of demand for the precious metal as a safe store of value. 

Investors now await key data out on Friday in the form of the US Nonfarm Payrolls (NFP) labor report for April, which could tone the outlook for the US economy and impact continued concerns around inflation. 

If the NFP shows a higher-than-expected number of nonfarm workers joined the ranks of the employed in the US in April, or if wages are shown to have risen sharply, it could change the outlook for inflation and interest rates. 

Economists’ expectations are for NFPs to come in at 243K from 303K in March, and for Average Hourly Earnings to rise by 0.3% MoM and 4.0% YoY. A marked rise – especially in these two metrics – could cause downside volatility for Gold price, and vice versa for a fall. 

FXStreet