Oil Price Crash Drives Gold Rebound Ahead of US Jobs Report

Gold prices are edging up ahead of the US non-farm payrolls report, but it's not the expected boost from the jobs data that's driving the move. Instead, a sharp decline in crude oil prices is behind the precious metal's rebound.

The key factor weakening oil and fuel prices is France's proposal for a coordinated release by European countries and International Energy Agency (IEA) members of 100 million barrels of crude oil and fuels. This plan involves supplying 50 million barrels of diesel by European nations and 50 million barrels of crude oil by other IEA member countries to the market.

France's proposal is a direct response to growing pressure from Washington, where the US administration is struggling with high fuel prices on the domestic market ahead of the upcoming midterm elections. The specter of possible US restrictions on diesel exports prompted European allies to seek market alternatives, resulting in an immediate drop in inflationary pressure from the energy market.

While a fall in energy commodity prices could lower inflation expectations over the longer perspective, creating a more favorable environment for precious metals before the NFP report release, bond yields in the US are currently extremely overheated. Market expectations point to a clear cooling in the pace of job creation in the US compared to the last strong report.