Gold falls below $4,700 ahead of US NFP release

Gold price falls to around $4,675 in Friday’s early Asian session.
Higher oil prices raised inflation concerns and changed US interest rate expectations.
The US March jobs data will take center stage later on Friday.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) remains on the defensive near $4,675 during the early Asian session on Friday. The precious metal falls as US President Donald Trump's comments about the war with Iran spiked oil prices. Trading activity remains muted due to Good Friday.

Trump said during a primetime televised speech from the White House on Thursday that his core "objectives are nearing completion" in Iran. Nonetheless, he added that the US would hit Iran “extremely hard” for the next two to three weeks.

These remarks have pushed crude oil prices higher and reduced expectations of interest rate cuts. Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.

Traders will take more cues from the key US March jobs data, which is due on Friday. Markets expect the Nonfarm Payrolls (NFP) to show 60,000 in March, while Unemployment Rate is expected to hold steady at 4.4% during the same period. If the reports show a weaker-than-expected outcome, this could undermine the US Dollar (USD) and provide some support to the USD-denominated commodity price.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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