Gold rises as markets eye lower interest rates, central bank demand

LONDON (May 6) The Gold price (XAU/USD) is trading up by almost a percent, in the $2,320s on Monday,  as markets weigh the implications of weaker-than-expected US jobs data on interest rates – a key driver of Gold price – and economic data from China, a major market for Gold, stays in expansive territory. Central bank demand remains strong further supporting prices. 

Gold price rises after US jobs, China data

Gold price rebounds on Monday as markets mull the outlook for interest rates in the light of recent US employment metrics. 

Friday’s US Nonfarm Payrolls data from the Bureau of Labor Statistics showed a below-estimated 175K people found work in April. More importantly, wage inflation showed a slowdown, with Average Hourly Earnings both on a yearly and monthly basis ticking down from where economists had expected. 

The weaker-than-expected data suggests the Federal Reserve (Fed) may lower interest rates sooner than had been anticipated. This scenario increases the attractiveness of Gold as lower interest rates reduce the opportunity cost of owning the non-yielding precious metal. 

Chinese Caixin Services PMI data released Monday showed the sector remaining in expansive territory (above 50) in April, keeping alive hopes of buoyant demand for Gold in China despite the country’s recent economic woes. 

Central Bank acquisitions of Gold remain net positive

According to data from the World Gold Council (WGC) tracking central bank acquisitions of Gold in March, buying showed a net positive of 15 tonnes from central banks, who have become one of the largest consumers of Gold in recent years. 

The figure was in line with previous months, keeping the positive trend in demand alive.

“Buying strength has continued into 2024, with emerging market banks the main driving force for both purchases and sales,” said Krishan Gopaul Senior Analyst, EMEA at the World Gold Council. 

FXStreet