Gold Retreats As U.S. Jobs Report Casts Doubt On Fed Rate Hike Pause

On Friday, gold prices experienced a decline following a day of marking their highest settlement level since August 2020. This was driven by the release of a strong U.S. jobs report for April, which fueled "fresh doubt" that the Federal Reserve would pause further interest-rate hikes. 

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According to Han Tan, chief market analyst at Exinity Group, gold prices were "dragged lower" toward the psychologically-important $2,000 mark due to the higher-than-expected nonfarm payrolls print and the unemployment rate matching a multi-decade low.

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 This latest evidence of a still-tight labor market is casting fresh doubt on a Fed hike pause, to the chagrin of the zero-yielding precious metal. The U.S. created 253,000 new jobs in April, which surpassed the 180,000 forecast of economists polled by The Wall Street Journal, and the unemployment rate fell to 3.4% from 3.5%.

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Tan noted that gold's recent rally had been fueled by expectations that U.S. rates have peaked, much to the relief of the zero-yielding asset. Additionally, the safe-haven asset had been bid up by persistent fears over U.S. banking turmoil, which raises the prospects of a recession.

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 He suggests that the precious metal should remain supported as long as markets refuse to abandon hopes for Fed rate cuts later in 2023, while fears over further U.S. financial turmoil continue casting a pall over risk sentiment. 

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Despite the post-NFP pullback in prices, Tan suggests that gold may yet harbor enough reasons to attempt a new record high. 

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However, previous spikes above $2,070 were swiftly unraveled, and such price action suggests that bullion isn't likely to hold after reaching a newfound peak.

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