Economic indicators driving gold's rise
The jump in gold prices was triggered by an unexpected rise in U.S. unemployment claims and disappointing non-farm employment data. The weaker-than-expected jobs report increased speculation that the U.S. Federal Reserve could cut interest rates as early as September to stimulate the economy. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets such as gold, making them more attractive.
Impact of government bond yields and dollar strength
Gold prices continue to rise even as the 10-year Treasury yield rises more than 5 basis points to 4.5%. This suggests that expectations for accommodative monetary policy are masking the typical negative effects of rising gold yields. Meanwhile, the dollar rose slightly on mixed economic data, but did not weaken the upward trajectory of gold prices.
Impact on future CPI and employment data
The release of the Consumer Price Index (CPI), scheduled for May 15th, is currently attracting a lot of attention, and high inflation is expected to continue. The CPI is expected to rise by about 0.3% month-on-month in April, with core inflation expected to be 0.3%. These numbers are closely watched as an indicator of whether the Fed will adjust interest rates. Additionally, the Fed has shifted its focus to employment data, suggesting that future policy decisions may also depend on the health of the job market.
Shelter costs and inflation expectations
Shelter costs, a key component of the CPI, continue to rise faster than other categories, potentially delaying a significant decline in overall inflation. The Federal Reserve is closely monitoring this trend, as reducing shelter costs could be important to achieving its 2% inflation target.
short term forecast
The gold market could become more volatile this week as traders and investors await the release of April CPI data. If the CPI shows inflation is cooling more than expected, or the jobs report reveals further weakness in the job market, gold could rise as interest rates are more likely to be cut.
However, if inflation data remains high or exceeds expectations, the Federal Reserve could choose to hold off on cutting rates, potentially curbing gold's upward momentum. Traders should always pay close attention to these key economic indicators, as they have a significant impact on gold price movements in the short term.