Gold Price Drops following US NFP Data

Gold prices ( XAU ) have dwindled following US Nonfarm Payrolls (NBP) data, with the gold price peaked at $2,310 but reversed gains. The US Bureau of Labor Statistics (BLS) revealed that April Nonfarm Payrolls missed estimates, indicating a cooling jobs market. The golden metal edged toward its daily high of $2,310 but failed to crack May 2's high of $2,326, exacerbating a retracement to current spot prices. The XAU/USD trades at around $2,300, virtually unchanged, down by 0.02%. Wall Street's optimistic mood weighs on the safe-haven appeal of the non-yielding metal.

US Treasury yields are sliding, with the 10-year benchmark note down seven basis points. US real yields, which correlate inversely with Gold prices, fell six and a half basis points from 2.219% to 2.146%. A Goldilocks scenario looms for the US following the US NFP report as the Institute for Supply Management (ISM) showed that business activity in the services sector contracted for the first time since December 2022. Fed Governor Bowman was hawkish in an interview with Bloomberg Television, saying that she is willing to hike rates if inflation stalls or reverses.

Gold prices remain underpinned by lower US Treasury yields and a softer US Dollar. The US 10-year Treasury note is yielding 4.506%, down seven basis points from its opening level. The ISM April Services PMI fell below the critical 50.0 mark, indicating contraction, with a reading of 49.4, lower than expected and below the figure for March.

Fed rate cut probabilities increased after the data release, with traders expecting 38 basis points of rate cuts toward the end of the year. The Federal Reserve's first-rate cut is seen in September, with odds standing at 87% for a 0.25% rate cut. The fed funds rate would finish the year at the 4.75%-5.00% range.