Gold trend confusion: After the gold price skyrockets, it may be corrected! Can non-agricultural data hold up?

Daocheng Technology Financial News -Gold priceMonday (April 1) continued its upward trend, hitting a new record high, mainly due toUnited StatesInterest rate cut expectationsAnd the attractiveness of gold as a safe haven asset. The US PCE price index released on Friday showed no unexpected rise, providing further impetus for gold prices. Markets will continue to focus on the US this weeknon-agriculturalEmployment reportTo obtain more guidance.

(One-hour chart of gold prices)
Gold prices rose to a record high on Monday as U.S. inflation data weakened, further solidifying market sentimentFederal ReserveThe expectation of a rate cut in June.

As of press time,Spot goldPrices rose 0.8% to 2250.97dollar/Ounce, which had hit an all-time high of $2262.19 earlier in the session.

Mansoor Mohi-uddin, chief economist at Bank of Singapore, said the Fed's willingness to tolerate inflation well above 2 percent while still considering rate cuts provided support for risky assets.

Gold priceUsually inversely related to interest rates. As interest rates fall, gold becomes more attractive relative to fixed income assets such as bonds, which offer lower returns in a low interest rate environment.

Commenting on the personal consumption expenditure price index report, IG market strategist Yeap Jun Rong pointed out that there was no unexpected increase in the core personal consumption expenditure price index, which may have provided impetus for gold prices to climb further to record highs.

According to the CME Group's FedWatch Tool, traders now see a 69% chance that the Fed will start cutting interest rates in June. Lower rates lower the opportunity cost of holding gold. Traders also expect a 75 basis point rate cut this year.

Citi strategists say the Fed will still start cutting rates in June. If economic activity remains on its current trend, the Fed could cut rates three times this year. However, if the labour market weakens further, they expect to cut rates five times this year.

World Gold Council market strategist Joseph Cavatoni said Monday that many market speculators are confident in the Federal Reserve's interest rate cut, which is a key factor driving gold prices higher.

Cavatoni added that gold's rally so far has been driven by heavy buying by central banks around the world. Central banks are trying to diversify their reserve portfolios due to geopolitical risks, domestic inflation and a weaker dollar. There are very good reasons for them to continue buying gold, but it remains to be seen whether large-scale and prolonged purchases will continue in the future.

This trading day, the Institute for Supply Management's (ISM) March factory activity survey is expected to show manufacturing contracting for the 17th consecutive month - the longest contraction since August 2000. Despite this, economists expect the index to rise to 48.4 from 47.8 in February, the highest level since December 2022.

The price-paid index is expected to rise to 52.6 from 52.5 in February, reflecting higher prices for commodities such as gasoline and food, which pushed the broader producer price index (PPI) higher than expected in March.

In addition, the employment sub-index stood at 45.9 last month. Although manufacturing accounted for only a small part of job growth, the survey may provide some insight into the overall trend of the job market.

The Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday may provide a better reflection of the tightness in the job market.

Friday's non-farm payrolls report is the focus of the week. After the strong performance of the Quarter 1 market, a "soft landing of three interest rate cuts" seems to be a foregone conclusion for investors. Therefore, the focus of this week's series of labor market data is likely to be on indicators of wage pressure, which the Federal Reserve has little influence over.