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• XAU/USD plunged, shedding 1.68% as rate hikes and soaring bond yields dulled gold’s allure.
• US Nonfarm Payrolls beat estimates with 253,000 new jobs, pushing Treasury bond yields higher.
• Gold demand dips in Q1 2023, with the central bank and Chinese consumer purchases being offset by investor buying.

The price of gold slid sharply on Friday as the XAU/USD failed to hold to its gains near the year-to-date high at $2081.46, as two major central banks increased rates, thus boosting bond yields. Additionally, a better-than-expected jobs report in the United States triggered a jump in US T-bond yields. Towards the end of Friday, XAU/USD was seen trading at around $2015.51, below its opening price by 1.68%.

Gold’s Rally Dented by US Data, Lower Demand

US equities continued to recover some ground after the US banking turmoil dented overall market mood. The US Department of Labor revealed the April US Nonfarm Payrolls, which showed that the labor market remains tight, with the economy adding 253,000 jobs, crushing forecasts of 180,000.

Additionally, the report revealed that wages are increasing, as shown by the Average Hourly Earnings jumping 0.5% month-over-month, above the 0.3% forecasts, while the Unemployment Rate continued to slump past 3.5%, at 3.4%.

XAU/USD plunged on the US jobs data release, from around $2038 to $2007. However, it later pierced below the $2000 figure, hitting a three-day low of $1999.57. This resulted from short-term futures traders pairing Federal Reserve rate cuts, as could be seen in US Treasury bond yields, which were seen skyrocketing after the NFP report.

The US 2 and 10-year Treasury notes were climbing 19 and 9 basis points each, yielding 3.924% and 3.443%, respectively. Despite the previously mentioned, factors the greenback remained downward pressured, registering modest losses.

The US Dollar Index (DXY), which measures the performance of six currencies vs. the greenback, dropped around 0.15%, down to 101.25.

Recently, St. Louis Federal Reserve President James Bullard commented that a soft landing is possible, adding that the labor report was “impressive.” Bullard said he’s open-minded about raising or holding rates at the FOMC’s next meeting in June, as he joined the “data-dependant” posture. Nonetheless, Bullard feels that rates need to “grind higher.”

Another reason that weighed on XAU/USD’s prices is that global demand for gold fell during the first quarter of 2023, as large purchases made by central banks and Chinese consumers were offset by investors buying, as reported by the World Gold Consortium (WGC).

Upcoming Events

The calendar is pretty light, with words from Fed Governor Lisa Cook looking to cross newswires.

XAU/USD Daily Chart

After hitting a new all-time high, XAU/USD retreated below the 61.8% Fibonacci retracement and was $2 shy of hitting the 78.6% Fibonacci level. Nevertheless, gold bounced from its daily low of $1999.57, above the 61.8% Fibonacci retracement at $2015.26.

Notably, the Relative Strength Index indicator remained in bullish territory, although it was seen moving down. The 3-day Rate of Change turned neutral in a possible sign of buyers booking profits before the weekend arrived.

For a bullish continuation, XAU/USD buyers must reclaim the 50% Fibonacci level at $2028. A break above would expose the 38.2% Fib retracement at $2040.60 before clearing the path toward the all-time high. Conversely, a fall below $2000 would expose a one-month-old support trendline that passes around the $1970-80 area.

XAU/USD

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