$4,400 Hurdle: Gold Struggles Amid Inflation Fears and Hawkish Central Banks
Gold prices kicked off the week on a bearish note, struggling to break above the $4,400 level amid US holiday-led light trading. Despite this, bulls seem reluctant to give up yet.
The precious metal is facing headwinds from rising oil prices, which are fueling inflationary concerns and prompting policy tightening globally. Lower interest rates typically boost gold demand, but expectations of rate hikes by major central banks, including the US Federal Reserve (Fed), undermine non-yielding bullion.
The recent robust US labor market report, which showed a 162,000 increase in Nonfarm Payrolls (NFP) in August and an unchanged Unemployment Rate at 4.1%, has kept Fed rate hike bets on the table for the September monetary policy meeting. According to TD Securities, the latest data reinforce the view that the jobs backdrop remains resilient.
The downside in gold seems capped by a broadly stable US Dollar (USD), as buyers quickly faded the post-NFP spike amid concerns over rising US government debt and the aggressively hawkish Bank of Japan (BoJ) repricing. The Japanese Yen (JPY) has pushed firmly higher at the expense of USD/JPY.
Looking ahead, gold remains vulnerable to renewed USD strength if US-Iran tensions escalate further. Thin market conditions could exaggerate gold price moves.