Gold Retreats As Robust US Data Dampen Rate Cut Expectations

(Bloomberg) -- Gold fell after closing at a record high last week, as investors weigh a strong US jobs report that saw traders unwinding bets for steep Federal Reserve rate cuts this year.

The precious metal fell as much as 1.2% in early Asian hours, pressured by a rise in Treasury yields after US payrolls rose in March by the most in nearly a year and the unemployment rate fell to 3.8%. Those numbers support the argument that the Fed will be in no rush to loosen monetary policy. Higher rates are typically negative for gold, which doesn’t pay interest.

Still, bullion remains supported above $2,300 an ounce following weeks of positive momentum. The move has left some onlookers puzzled amid a lack of any obvious trigger for the sudden rally which began in mid-February. 

Gold is up more than 17% since then, with at least some of the gains fueled by optimism that the Fed was getting closer to cutting rates. Central bank demand has also been a factor, with the People’s Bank of China reporting additions for a 17th straight month in March.

Read More: The Gold Market Hunts for Answers Behind Bullion’s Sudden Surge

Investors will be closely watching US March inflation data due on Wednesday, which could shed more light on where policymakers stand in their pivot to lowering borrowing costs.

Elsewhere, traders continue to monitor tensions in the Middle East. Israel said on Sunday the country is removing some troops from southern Gaza after Prime Minister Benjamin Netanyahu said victory was within reach. Iran, meanwhile, is preparing a response to a suspected Israeli attack on its consulate in Syria, while Hezbollah warned that it’s ready for war. Bullion tends to benefit from increased demand for haven assets during times of heightened geopolitical risk.

Spot gold was 0.2% lower at $2,325.26 an ounce as of 10:01 a.m. in Singapore. The metal touched a record $2,330.50 on Friday. The Bloomberg Dollar Spot Index edged higher, while silver rose and platinum and palladium fell.

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