XAU/USD DIPS FOR THE SECOND DAY AS US LABOR MARKET DATA SPARKS RECESSION FEARS

Gold price slides for the second consecutive day, though it’s bracing for the March 20 high at around $2,009.75. Worse than expected, US labor market data accumulated during the week triggered investors worried about a possible recession in the United States (US). Therefore, traders scaled back their bullish bets in the yellow metal. At the time of writing, the XAU/USD is trading at $2,011.28.

XAU/USD retreats from YTD highs, ahead of US Nonfarm Payrolls report

Global equities are trading mixed, with most European (EU) bourses trading with gains. Wall Street is extending its losses to four straight days. Gold price headed down spurred by a jump in US Initial Jobless Claims for the week ending on April 1, which increased by 228K above forecasts of 200K. Additionally, data from the week before April 1 was upward revised from 198K to 246K, painting a dismal scenario for the US labor market.

Latest data like the ADP report missing estimates and job vacancies heading south exacerbated an investor’s flight to safety, initially sending XAU/USD rallying towards its YTD high of $2,032.13. Nevertheless, bad US jobs data underpin the greenback despite US Treasury bond yields continuing to drop.

US Treasury bond yields, particularly the most sensitive to interest rates, the 2-year, dropped to 3.674% before reversing their course and is up at 3.783%.

Even though the US 2-year Treasury bond yield has gained traction, money market futures estimate that the Federal Reserve (Fed) would hold rates unchanged, as shown by the CME Fed WatchTool. The odds of keeping rates at 4.75%-5.00% are 56.1%. In addition, some investors speculate that the Fed could cut rates as soon as July.

Lately, the St. Louis Federal Reserve President James Bullard said that Q1’s incoming data is stronger than expected, adding that financial conditions are less tighter than the 2007-2009 crisis. Bullard said inflation would be “sticky going forward” and that the Fed “needs to stay at it” to get inflation back to its 2% target.