Gold prices try to hold above $1,270 on Friday after sharply decreasing and seeing four-month low yesterday as Federal Reserve disappointed rate cut expectations. While dollar gets stronger following Fed Chair Jerome Powell’s statement saying that weakness in inflation was transient and it was expected to rise back to 2% target eventually, note yields continues to increase on Friday weighing further on gold prices. By the way, US non-farm payrolls increased above expectations however, wage growth was steady in April, according to data released today. On the other hand, Eurozone inflation increased above expectations in April.
While Fed Chair Jerome Powell drew attention to strong labor market and economic activity and stated weak inflation was expected to be transient, which was not seen as a dovish stance, gold prices remained weak after hitting four-month low yesterday since Fed dampened rate cut expectations.
As of 15:36, spot gold was trading at $1,271.80 an ounce while dollar index was up to 97.97. US 10-year Treasury yield also increased to 2.554.
OANDA senior market analyst Jeffrey Halley said on Reuters that increase in dollar index and note yields would continue while adding there was no data showing any kind of slowdown in US economy so far which would keep weighing on gold prices further.
According to data released in the US today, non-farm payrolls increased by 263,000 in April, beating expectations of 185,000 and thus unemployment decreased to 3.6% from 3.8%. However it was seen that wage growth was steady at 3.2% in the same month which was below expectations and seen not a good sign for inflation as Powell said inflation would increase alongside strong labor market and increasing wages. Some analysts stated weak inflation could be persistent on the contrary to Fed’s expectations and underlined a rate cut was not completely off the table yet.
In the meantime, Eurozone consumer inflation was above expectations in April and increased to 1.7% from 1.4% annually. Core consumer inflation, which is watched closely by European Central Bank in deciding monetary policy, was also better than expected and edged up to 1.2% in April from 0.8%. However, producer prices declined in March since prices was down by 0.1% monthly and annual producer inflation edged down to 2.9%. So, it is a good sign for Eurozone economy given that Eurozone showed better than expected performance and grew by 0.4% in the first quarter, however more time needed to see an actual recovery in bloc’s economy.