The price of gold rose by about $40, continuing yesterday's increase, and reaching its highest level since April 22. The catalyst for the latest rally was the increased likelihood of easing the Fed's monetary policy. The depreciation of the US dollar also supported the precious metal.
The latest data indicates a slight weakening in the jobs market, bolstering expectations that the Fed’s interest-rate cuts may happen sooner than previously expected. The Ministry of Labor reported yesterday that the initial claims for unemployment benefits reached 231,000 for the week ended May 4. This is the highest value since August 2023. Economists had forecasted 212,000 new claims last week. Claims for the prior week were revised upwardly to 209,000 from the original estimate of 208,000.
According to the CME FedWatch Tool, markets currently see an 8.5% probability of a 25 basis point rate cut at the Fed meeting in June, a 33.1% probability of a rate cut in July, and a 67.9% probability of monetary policy easing in September. Lower interest rates reduce the opportunity cost of holding bullion. The next event that may affect the outlook for the Fed's monetary policy will be the publication of US inflation data next week. According to forecasts, CPI growth slowed to 3.4% per annum in April from 3.5% per annum in March, and the core CPI increased by 0.3% m/m, slowing slightly compared to March (+0.4%).
Meanwhile, experts said that gold prices are likely to remain volatile in the coming months as the market reacts to macro drivers, tracking geopolitical events and Fed rate policy.