Gold Dips on Profit-Taking as NFP Looms
The gold (XAU/USD) price declined by 0.3% on Thursday as US Treasury yields rose and traders took profits on their long positions.
We are just seeing some mild profit-taking pressure from recent gains; the underlying fundamentals are still bullish.
"Another thing that's putting some mild pressure on the gold market is a rise in bond yields," said Jim Wyckoff, senior market analyst at Kitco Metals.
XAU/USD has increased by more than 10% this year amid geopolitical uncertainties but has been struggling to break above the $2,950 level lately. The simmering global trade war has fueled speculations that the global economy may be destabilised, inflation will surge, and long-term economic growth will be significantly hampered, leading to a protracted period of stagnation. These fears prompt investors to buy safe-haven assets like gold and silver.
On Tuesday, the US imposed a 25% tariff on imports from Mexico and Canada and duties on Chinese goods. On Wednesday, however, the White House confirmed it will exempt Canadian and Mexican automakers from tariffs for a month, subject to their compliance with existing free trade rules. At the same time, the Federal Reserve (Fed) is still expected to cut the rates only once this year. Moreover, several Fed officials gave hawkish signals, suggesting that the US central bank will unlikely have enough clarity to move on interest rates before late spring or summer.
XAU/USD was falling during the Asian and early European trading sessions. Today's main event is the US nonfarm payroll (NFP) report, influencing the Fed monetary policy expectations. The report at 1:30 p.m. UTC will likely trigger heightened volatility in the Forex market, including gold. The market expects the number of jobs created to increase by around 160,000 in February and hourly earnings to grow by 4.1% annually. If the NFP report is stronger than expected, XAU/USD may pull back noticeably. Weaker-than-expected NFP numbers may give XAU/USD a minor boost.
"Spot gold is biased to break support at $2,894 per ounce and fall into the $2,861 to $2,879 range", said Reuters analyst Wang Tao.
Profit-Taking and Bond Yields Pressure Euro
On Thursday, the euro (EUR/USD) lost 0.06% against the US dollar (USD) as it failed to hold above the critical 1.08500 level.
Despite a drop in the US Dollar Index (DXY), the euro weakened as traders took profit on their long positions after a strong three-day rally. Also, EUR/USD failed to hold above an important technical level. In addition, the rout in the German bond market weighed on investors' sentiment. Yields on 10-year bunds continued rising, adding as much as 14 basis points on Thursday and reaching 2.93%, the highest since October 2023. The rate jumped by 30 basis points on Wednesday, the biggest increase since the Berlin Wall fell in November 1989. At the same time, investors are now worried about the potential impact of the Trump administration's tariffs on the US economy. These worries are exerting downward pressure on the US dollar.
"The narrative has shifted on tariffs, which are now viewed as a hindrance to economic growth. The market is starting to see that there are a lot of US companies dependent on exports and imports. If our trade numbers decrease overall, that's probably not good for the economy, which could slow down as a result", said Eugene Epstein, head of trading and structured products of North America at Moneycorp.
Overall, EUR/USD is caught between two powerful and opposing forces. On one hand, there's the growing anticipation of a potential shift in US monetary policy towards a more dovish stance. This anticipation comes from increasing signals of a slowing US economy, with economic indicators pointing towards weakening growth. On the other hand, this potential weakness of the US dollar is balanced by the challenges the eurozone faces, including concerns about the debt level. Also, the ongoing geopolitical tensions often lead to increased demand for the US dollar as a safe-haven asset, regardless of the Fed's monetary policy.
EUR/USD was rising during the Asian and early European trading sessions. Today, the main focus is on the US nonfarm payroll (NFP) report at 1:30 p.m. UTC. The data may influence interest rate expectations and investors' sentiment, so we expect sharp price movements in various instruments, including EUR/USD. The market expects the number of jobs created to increase by around 160,000 in February and hourly earnings to grow by 4.1% annually. If the NFP report reveals stronger-than-expected results, EUR/USD may drop towards 1.07000. Otherwise, EUR/USD may rise above 1.08500 on weaker NFP data.
Bitcoin Dips as Trump's Crypto Reserve Plan Sparks Debate
Bitcoin (BTC/USD) dropped by 0.75% yesterday as a 25-day exponential moving average proves to be too strong of a resistance for now.
On Thursday, US President Donald Trump signed an executive order to establish a strategic Bitcoin reserve. Earlier this week, Trump announced the names of five digital assets he expects to include in the reserve, boosting these coins. The five assets are Bitcoin, Ethereum, XRP, Solana, and Cardano. However, it's unclear how exactly such a reserve would work or how it would benefit the taxpayers. David Sacks, an entrepreneur, said the federal government will have a strategy to maximise the value of its holdings, without offering details.
"The US won't sell any Bitcoin deposited into the reserve. It will be kept as a store of value. The reserve is like a digital Fort Knox for the cryptocurrency often called 'digital gold", Sacks said. Proponents argue that a reserve would help taxpayers benefit from crypto's price growth.
However, some crypto enthusiasts were disappointed by the announcement.
"This is the most underwhelming and disappointing outcome we could have expected for this week. No active buying means this is just a fancy title for Bitcoin holdings that already existed", said Charles Edwards, founder of Bitcoin-focused hedge fund Capriole Investments.
BTC/USD fell during the Asian session and started to rise again during the early European session. Today, Donald Trump will meet with executives from the cryptocurrency industry at the White House for a crypto summit. Attendees expect the event to serve as a stage for Trump to formally announce his plans to build a strategic reserve containing Bitcoin and four other cryptocurrencies.
Traders should watch the official White House statement as it may spur extra volatility in the crypto market. In addition, await the US nonfarm payroll (NFP) report, due at 1:30 p.m. UTC. Lower-than-expected figures may increase the chances of more rate cuts by the Federal Reserve, supporting BTC/USD. Conversely, higher-than-expected results will likely have a bearish impact on the pair.