Gold Price Forecast: Short-term headwinds for XAU/USD – Commerzbank

Gold under pressure after US labor market data. Economists at Commerzbank analyze the yellow metal’s outlook.

Even a rate cut at the May meeting is no longer considered to be a foregone conclusion

The Gold price came under pressure on Friday following the publication of unexpectedly strong US labor market data. The data may not only have dashed hopes of an interest rate cut by the US Federal Reserve in March. Even a rate cut at the May meeting is no longer considered to be a foregone conclusion. As a result, the extent of interest rate cuts later in the year will also come under scrutiny. 

Before the data was published on Friday, the market was expecting a Fed funds rate of around 4% at the end of the year based on Fed fund futures. The Fed rate expected for the end of 2024 is now around 30 basis points higher. In other words, at least one interest rate cut has been priced out. The US Dollar has appreciated accordingly and US bond yields have risen sharply. Both mean short-term headwinds for the Gold price.