2024-05-06 08:33:04 ET
Gold prices experienced a notable increase on Monday, trading in the $2,320s, as markets reacted to the latest U.S. jobs report and strong economic data from China, alongside sustained central bank demand for the precious metal.
US employment data softens, boosting gold appeal
The gold market rebounded as the recent U.S. Nonfarm Payrolls data revealed weaker-than-expected job growth, with only 175,000 positions added in April, below market forecasts.
More crucially, the slowdown in wage inflation, as evidenced by lower-than-expected Average Hourly Earnings, suggests that the Federal Reserve might consider lowering interest rates sooner than previously expected.
Lower interest rates make gold, which does not yield interest, a more attractive investment by reducing the opportunity cost associated with holding it.
China’s economic activity remains robust
Further supporting the rise in gold prices, the latest Chinese Caixin Services Purchasing Managers’ Index (PMI) for April indicated that the sector continues to expand, scoring above the 50-point mark that separates growth from contraction.
This sustained expansion is a positive sign for gold demand in China, which has faced recent economic challenges but continues to show resilience.
Central banks continue to bolster gold demand
Central bank activity also played a key role in supporting gold prices, with a net increase in gold acquisitions reported for March.
According to the World Gold Council, central banks added 15 tonnes of gold to their reserves, maintaining a consistent pattern of purchases. This ongoing demand from central banks, who are among the largest buyers of gold globally, continues to underpin the market.
The combination of softer economic indicators in the U.S., continued economic expansion in China, and consistent central bank demand suggests a potentially bullish market for gold as investors and financial institutions recalibrate their strategies in response to global economic trends.
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