Gold consolidated, remaining near a one-week low, while market participants are cautious ahead of the publication of US data, which may affect the prospects for the Fed's monetary policy. On Friday, gold prices fell by 0.87%, despite the fact that data showed that US inflation rose in line with expectations in April. These data have increased the likelihood that the Fed will be able to cut interest rates this year.
This week, investors will focus on the US PMI data, as well as the key report on the labor market, which will be released on Friday. These data will allow for a better assessment of the current state of the economy and provide clues about the Fed's next actions. The nonfarm payrolls growth accelerated in the first quarter, increasing by an average of 269 thousand compared with an average monthly growth of 213 thousand in the second half of 2023. Strong job growth and unexpected surprises in the inflation data forced the FOMC to postpone its plans to cut rates until at least the second half of the year. At the beginning of the second quarter, job growth weakened again, while employment increased by 175 thousand in April. It is expected that the growth rate of the number of jobs in the next few months will be more similar to April, while employment growth of 185 thousand is projected in May. Meanwhile, the unemployment rate probably remained at 3.9% in May. According to the CME FedWatch Tool, markets see a 14.5% probability of a 25 basis point rate cut at the Fed meeting in July, a 53.9% probability of a rate cut in September, and a 67.2% probability of monetary policy easing in November, with traders pricing in 37 basis points of cuts this year. While bullion is considered an inflation hedge, higher rates increase the opportunity cost of holding the non-yielding asset.