International gold prices held steady above $1900 an ounce on Monday, boosted by a weaker dollar and falling US bond yields, as well as fuelled by rising inflationary pressures. This month is on track for its biggest monthly increase since July last year. At present, the gold market is focused on the risk of inflation, and the non-farm payrolls report to be released later this week will provide further clues to the short-term trend of gold.
So far, spot gold has risen 0.11 per cent to $1905.66 an ounce, while US gold futures have risen 0.15 per cent to $1908.10 an ounce. International gold prices have risen nearly 8 per cent so far this month.
Gold is usually used as a hedge against inflation. According to the latest official figures, the US PCE price index rose 3.6 per cent in April from a year earlier, the biggest increase since 2008 and well above the Fed's official inflation target of 2 per cent. Excluding volatile food and energy prices, the core PCE price index rose 3.1% in April from a year earlier, the biggest increase since 1992.
With inflation showing signs of rising and fears that a resurgence of outbreaks in some countries could lead to an uneven economic recovery, gold has recovered its losses since 2021 and became one of the best-performing metals in May.
Investor interest is returning, with hedge funds and other large speculators raising their net long positions in gold to their highest level since early January, while positions in gold exchange traded fund (ETF) climbed in May after three consecutive months of declines.
"Gold has performed well this month for a number of reasons, such as a weaker dollar, slightly lower bond yields and inflation concerns raised by US CPI data," said John Feeney, business development manager at Guardian gold Australia, a gold trader in Sydney. "there is growing concern that a new epidemic in Southeast Asia will slow the global economic recovery."
Stephen Innes (Stephen Innes), managing partner of SPI Asset Management, said: "Gold's strength is largely due to inflation concerns and falling Treasury yields. It is quite advantageous that the dollar continues to weaken. The bulls are now looking at $2000, and most people think the price of gold will go even higher. "
Can we continue the strong rising trend and look at non-farmers?
The gold market will usher in its next critical moment on Friday, when the May non-farm payrolls report is released. The median market estimate is 650000 new jobs.
Investors will use the report to assess whether last month's unexpectedly sluggish job growth is temporary or the beginning of weak economic growth. In the United States, non-farm payrolls increased by 266000 after the quarterly adjustment in April, far below the market's growth forecast of nearly one million.
"there is a clear bullish trend in demand for the precious metal as gold prices break through $1900 an ounce," said Howie Lee, an economist at OCBC Bank. "weak non-farm payrolls data released on Friday could push gold prices up to $1975 an ounce."
From a technical point of view, if gold breaks through $1915.60, it will herald a return to the target of $1950. Gold prices are strongly supported at $1875 and $1850 levels, "Avtar Sandu, senior commodities manager at Phillip Futures, said in a report.
