Safe-Haven Demand Pushes Gold Higher
The gold (XAU/USD) price remained relatively unchanged on Friday but had a weekly gain primarily due to safe-haven inflows amid rising geopolitical uncertainty.
Friday's US nonfarm payroll (NFP) report revealed lower-than-expected job growth in February, suggesting that the Federal Reserve (Fed) is on track to cut interest rates this year. The report provided additional support to XAU/USD. However, Jerome Powell, the Fed Chair, said that the central bank would take a cautious approach to monetary policy easing, adding that the economy currently 'continues to be in a good place'. Still, the market continues to price in more than a 50% chance that the Fed will cut the rates by 25 basis points (bps) in June. Lower interest rates increase gold's appeal to investors, reducing the opportunity cost of holding a non-yielding asset.
Strong structural demand also supports the gold price. On Friday, the People's Bank of China (PBoC) reported that its gold reserves rose towards 73.61 million fine troy ounces at the end of February, as the central bank kept buying the precious metal for a fourth straight month.
"The PBoC's purchases are an important factor underpinning gold, so a continuation of its buying in February could help to build further strength behind the gold price", said Frank Watson, market analyst at Kinesis Money.
XAU/USD was relatively unchanged during the Asian and early European trading sessions. Today's economic calendar is rather uneventful, so the probability of large moves is relatively low. Thus, volatility may remain subdued, keeping XAU/USD in a narrow range.
"Spot gold looks neutral in a range of $2,894 to $2,927 per ounce, and an escape could suggest a direction", said Reuters analyst Wang Tao.
Euro Rises on Weaker-than-Expected NFP Data
The euro (EUR/USD) gained 0.45% against the US dollar (USD) on Friday after a weaker-than-expected nonfarm payroll (NFP) report damaged the greenback.
Last Friday, the US Labor Department report revealed that the US economy added 151,000 jobs in February, lower than the expected 160,000. Meanwhile, the unemployment rate stood at 4.1% compared with the forecasted 4%. The report suggested that the US labour market was cooling, so the Federal Reserve (Fed) may be more willing to cut interest rates in the months ahead. Investors now price in a 53.8% chance that the US central bank will reduce borrowing costs by 25 basis points (bps) in June. At the same time, the chances of a similar cut by the European Central Bank (ECB) currently stand at 52%. The divergence in monetary policy expectations between the ECB and the Fed has narrowed substantially, probably explaining the 5% rally in EUR/USD over the past week.
EUR/USD was rising during the Asian trading session but started to fall during the European trading hours. There are no important events today. Thus, volatility may remain subdued, with EUR/USD moving in a narrow range. Still, German Industrial Production and Trade Balance data at 7:00 a.m. UTC may trigger some volatility in the pair.
Australian Dollar Is Under Bearish Pressure
The Australian dollar (AUD/USD) lost 0.41% against the US dollar (USD) on Friday despite a weaker-than-expected US nonfarm payroll (NFP) report.
AUD is a very risk-sensitive currency, and its performance is often used as a proxy for investors' sentiments. Currently, escalating concerns regarding potential global recession due to rising trade tariffs highly influence investors' risk appetite. On Sunday, US President Donald Trump refused to predict whether his tariffs on Canada, Mexico, and China, which led to a 1% decline in Nasdaq futures on Monday, would result in a US recession. In addition, China's consumer price index in February was below the forecast. The indicator fell at the sharpest pace in 13 months as seasonal demand faded and households remained cautious about spending amid job and income worries. China is Australia's biggest trading partner, so a slowdown in the Chinese economy would likely weigh heavily on Australian exports. It could further dampen economic growth and exacerbate the depreciation of the AUD, exerting significant downward pressure on AUD/USD.
AUD/USD was rising during the Asian and early European trading sessions. Today's macroeconomic calendar is rather uneventful, so volatility will likely remain low, and AUD/USD will continue moving in a narrow range. Still, the Westpac Consumer Sentiment report at 11:30 p.m. UTC will likely trigger some volatility. Only a rise above 0.63900 will invalidate the underlying bearish trend in AUD/USD.