The gold price (XAU/USD) attracted some intraday sellers after a brief uptick in the Asian session to the $3,372-3,373 range. However, the commodity failed to maintain momentum and remains above the overnight swing low. The U.S. Dollar (USD) is looking to extend its bounce from a six-week low, which, combined with a generally positive risk sentiment, has exerted downward pressure on gold. Still, several factors suggest caution before positioning for a further downside move following the pullback from a nearly four-week high.
Key Factors to Watch: Fed, Inflation, and Geopolitics
Investors are still leaning toward the idea that the Federal Reserve (Fed) will lower interest rates further by the end of the year, especially given signs of easing inflationary pressures in the U.S. However, concerns surrounding the U.S. fiscal conditions may prevent USD bulls from taking aggressive positions, providing some support for gold. Additionally, ongoing geopolitical risks and trade uncertainties continue to support gold as a safe-haven asset.
U.S. Job Openings Data: A Mixed Picture
The Job Openings and Labor Turnover Survey (JOLTS), released on Tuesday, showed that 7.39 million job openings remained on the last business day of April, exceeding expectations of 7.1 million and surpassing March’s 7.2 million. The report points to the ongoing resilience of the U.S. labor market, which strengthens optimism about the broader economy.
However, despite the positive labor data, the USD faces pressure from declining U.S. Treasury bond yields and expectations that the Fed will implement at least two rate cuts (25 basis points each) by year-end. Additionally, growing concerns that the U.S. budget deficit could widen due to President Trump’s tax and spending policies are also weighing on the Greenback.
Fed Commentary and Outlook
Fed officials have made mixed remarks about the future path of monetary policy. Atlanta Fed President Raphael Bostic expressed caution about cutting rates, advocating for patience in addressing inflation. While he sees a potential path for one rate cut this year, he does not foresee a recession at this point.
Chicago Fed President Austan Goolsbee noted that any economic slowdown related to tariffs might not show up in the data immediately. Meanwhile, Fed Board of Governors member Lisa Cook highlighted concerns over the impact of trade policies on inflation and economic activity, warning of the potential for stagflation due to rising tariffs.
Trade and Tariff Risks
Tensions surrounding trade policies remain high, with President Trump and Chinese President Xi Jinping expected to hold a call this week, likely on Friday, amid renewed fears of a trade war. Steel and aluminum import tariffs are set to increase from 25% to 50% starting Wednesday, adding a layer of risk premium to the gold price as a safe-haven asset.
What’s Next for Gold?
Looking ahead, traders are focused on the upcoming U.S. ADP private-sector employment report and the ISM Services PMI. Additionally, speeches from key FOMC members will drive USD demand and could influence the XAU/USD pair. However, the primary focus remains on the Nonfarm Payrolls (NFP) report, which will provide fresh insight into the health of the U.S. labor market and, by extension, the Fed’s likely course of action.
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