Gold prices climbed higher and dived this week, failing to hold on to the $2040 mark as the U.S. non-farm payrolls report came in stronger than expected. Despite this setback, experts remain optimistic about the future of gold.
On Friday (February 2), the U.S. non-farm payrolls report exceeded expectations, leading to a strong dollar and soaring yields. As a result, gold prices fell, with spot gold closing down 0.75% at $2,039.48 per ounce. Despite this, gold prices still managed to rise nearly 1% for the week.
The dollar index climbed 0.9%, causing gold prices to become higher for overseas investors. Additionally, the benchmark 10-year Treasury bond yield also showed an upward trend. Commenting on this, Tai Wong, an independent metals analyst in New York, stated that gold prices have remained relatively firm despite the strong jobs report, suggesting that a significant drop is yet to be seen.
Federal Reserve Chairman Jerome Powell also expressed confidence that inflation will return to the 2% target, dismissing the idea of a spring interest rate cut. Joseph Cavatoni, market strategist at WGC, highlighted that stable interest rates and a lack of clear guidance may lead to relatively mild upward momentum for gold prices.
Looking ahead, economists remain optimistic about the gold market’s performance this year. With the expectation that monetary policy tightening will turn to easing in the second half of the year, as well as rising geopolitical risks and active central bank purchases, the conditions for gold investment demand remain favorable.
However, ANZ Bank pointed out that market expectations for an early interest rate cut by the Federal Reserve are weakening, bringing short-term pressure to gold prices. On a similar note, Commerzbank strategists predict that the gold market will resume its upward trend in the second half of the year, but will see little upside for the time being.
In conclusion, while gold prices faced some downward pressure this week, there remains a positive outlook for the future. With the potential for a shift in monetary policy and continued geopolitical tensions, gold investment demand could continue to drive the market in the second half of the year. Despite short-term uncertainties, the long-term prospects for gold remain promising.