Gold continues to decline as the US labour market strengthens

Gold was back down on Thursday by more than 1% today at 1:15 p.m. GMT, trading near the level of $2,290 per ounce.

Gold’s declines come after better-than-expected numbers for the US labour market, which would reinforce pessimistic assumptions about the path of monetary policy, in conjunction with the calm of the geopolitical front in the Middle East until now.

On Thursday we witnessed a lower-than-expected amount of weekly initial unemployment claims, at 208K, in addition to the fastest pace of growth in unit labour costs in two years, according to the preliminary reading of the Bureau of Labor Statistics for the first quarter, at a rate of 4.7%, which had also exceeded expectations.

While gold gained some relief on Wednesday from its recent losses with the Federal Reserve talking about its desire to cut current rates this year, in addition to weaker than expected figures for manufacturing activities and job openings.

In the end, in addition to Thursday’s figures, the markets do not seem to be anticipating a rate cut closer than next September, at the earliest. Therefore, gold needs the return of negative surprises from the US economy and the continued trend of central banks to accumulate bullion or the trend of the ongoing conflict in the Middle East to worsen again in order to restore the yellow metal’s luster as a safe haven in times of war.

The Middle East front seems relatively calm at the regional level, but what the markets fear is the beginning of the ground military operation in Rafah, which already seems imminent and is being prepared for. While regional and international parties continue to warn of the dire consequences of this process, which may extend beyond the scope of the current conflict.

We conclude this week with another batch of US economic data, with numbers for non-farm payrolls, unemployment, and average hourly earnings, in addition to ISM service PMI reading. I believe that the earnings growth figures will be the most important today, as the greater than expected acceleration may indicate more inflationary pressures in the future, which will give more comfort to the Fed by keeping the current rates as they are for a longer period.