The price of gold has fallen below the $2,000 mark for the first time since November 24th, with a decrease of 0.50% due to strong economic data from the US. The XAU/USD is currently trading at $1996 after reaching a high of $2034.00 earlier in the day.
The decline in XAU/USD follows the release of the US employment report, which showed that the labor market is improving. The US Bureau of Labor Statistics (BLS) revealed that the economy created 199,000 jobs, surpassing the forecast of 180,000, and the Unemployment Rate dropped from 3.9% to 3.7%.
This positive data has led to a rally in the US Dollar (USD), as indicated by the US Dollar Index (DXY) remaining 0.40% above its opening price, making dollar-denominated commodities more expensive. Additionally, the US 10-year benchmark note yields are up eight basis points from Thursday’s close, reaching 4.237%.
The University of Michigan (UoM) also reported that American households are becoming more optimistic about the economy, and they have revised their inflation expectations downward.
As a result of this data, traders have reduced their expectations for rate cuts by the Federal Reserve in 2024. The Chicago Board of Trade (CBOT) suggests that investors now anticipate 118 basis points of rate cuts for 2024, down from 140 basis points the previous week. This indicates a shift towards a less dovish stance by the Fed.
Looking ahead, traders are focusing on the upcoming US inflation report and the Federal Open Market Committee (FOMC) meeting. It is expected that inflation will remain at 3.1% over the next twelve months, with monthly inflation likely to stay at 0%. The Core Consumer Price Index (CPI) is forecasted to remain unchanged at 4% year-on-year and 0.3% monthly. Additionally, traders expect the Fed to maintain current interest rates.
In terms of technical analysis, the decline below $2,000 for XAU/USD could signal a further downward trend in prices.
Insight: The decrease in gold prices is a direct result of the positive economic data coming out of the US, which has strengthened the US dollar and reduced expectations for future rate cuts by the Federal Reserve. Traders are now closely watching upcoming inflation data and the FOMC meeting for insight into future monetary policy decisions. If economic data continues to show strength, it could put further downward pressure on gold prices in the near term.
