Gold price rises on softer US Dollar

Gold price cheers downbeat US Dollar performance as the greenback’s gauge versus six major currencies dropped for the fourth consecutive week in the last while the XAU/USD prints the first weekly gain in three.

While tracing the US Dollar weakness, as well as the Gold price run-up, recently downbeat United States data and receding hawkish bias for the Federal Reserve (Fed) gain major attention.

That said, the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) rose by 236K in March, the lowest since January 2021 (considering the revisions), versus 240K expected and 326K prior. Further, the Unemployment Rate eased to 3.5% versus 3.6% prior while the Labor Force Participation Rate improved to 62.6% from 62.5%. Finally, annual wage inflation, per the Average Hourly Earnings, dropped to 4.2% from 4.6%, versus market forecasts of 4.3%. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

The downbeat US data also propels fears of a recession in the world’s largest economy and weigh on the US Dollar, as well as fuels the Gold price. As per the latest research, the Federal Reserve’s (Fed) preferred gauge of economic health backed the recession woes, via bond market clues. Reuters said, “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction.”

With the downbeat US data and recession woes, the Federal Reserve (Fed) officials also surrender previously hawkish bias and allow the Gold price to remain firmer. As a result, market players’ bets on the Fed’s rate hike moves have been softer of late. While portraying the same, the CME’s FedWatch Tool signals a static 71% chance of witnessing a 0.25% rate hike in May but the odds of getting a rate cut in late 2023 has recently gained attention and weighed on the US Dollar, while also fueling the XAU/USD.