Gold Demand Remains Strong Amid Fed Rate Cut Expectations
Gold prices continued to find strong support as the US dollar remained under pressure amid speculation that the Federal Reserve (Fed) will ease monetary policy in the near future.
Concerns over a US economic slowdown have reinforced market expectations that the Fed will act to cut interest rates, thus increasing demand for gold as a hedge against economic uncertainty.
Tariff Uncertainty Heightens Inflation Concerns
President Donald Trump's trade policies continue to cause market concerns, with the latest developments on tariffs adding to inflationary pressures.
Although the Trump administration has delayed tariffs on vehicles for a month and is considering agricultural tax exemptions for Canada and Mexico, investors remain wary of the risk of stagflation.
The US dollar's weakness on lackluster economic data has also kept markets cautious, with the EUR/USD currency pair rising to a four-month high.
Rising German Bond Yields Limit Potential Gold Surge
The euro's strength was driven by a surge in German government bond yields after policymakers in Berlin agreed to implement a large-scale fiscal stimulus.
The rise in German bond yields also led to a rise in global bond yields, including US Treasury bonds, which in turn slowed the momentum of gold's rise.
However, the upcoming monetary policy decision of the European Central Bank (ECB) could be a risk factor to the euro's rise if the ECB takes a more cautious approach, the US dollar could potentially strengthen again, thus pushing gold prices lower.
US Jobs Data to Be the Main Focus of Markets
The market is now focusing on US labor market data for a clearer picture of the extent of the economic slowdown.
Wednesday's ADP report showed a sharp slowdown in private sector job growth, with just 77,000 new jobs added in February, well below expectations of 140,000.
However, the ISM Services PMI index surprisingly recorded an increase, giving some hope for the US economic outlook.
All eyes are now on Friday's NFP (Nonfarm Payrolls) report which is expected to be the key catalyst in determining the direction of the Fed's interest rate policy.
Short-Term Market Drivers: Unemployment Claims and Tariff Developments
In the near term, unemployment claims data as well as any new developments on the Trump administration's tariff strategy will be the main focus.
Any changes in trade policy or additional indications of labor market weakness could have a major impact on the performance of the US dollar, thus influencing gold price movements.
Traders are advised to remain vigilant as market sentiment remains volatile with several key catalysts set to determine the market direction in the near term.
