Gold prices surged late in the North American trading session on Friday, climbing by over 1% despite the continued strength of US Treasury bond yields. The rally came as a result of a University of Michigan (UoM) survey revealing a significant decline in consumer sentiment, hitting its lowest level in six months.
At the close of trading, the XAU/USD pair was trading at $2,369, rebounding from its earlier daily lows of $2,343. The pessimism reflected in the sentiment data, coupled with disappointing labor market figures released earlier in May, painted a grim picture of the US economy. Despite minimal concerns of a severe economic slowdown, investors seeking refuge flocked to safe-haven assets, driving both gold and the US Dollar higher.
Federal Reserve officials remained in focus throughout the day, with Atlanta Fed President Raphael Bostic adopting a hawkish stance by indicating that the Fed is on course for only one rate cut in 2024. Similarly, Fed Governor Michelle Bowman emphasized the need for policy stability and dismissed the notion of rate cuts this year. Dallas Fed’s Lorie Logan echoed these sentiments, rejecting the idea of interest rate cuts.
Minneapolis Fed President Neel Kashkari expressed a cautious stance, stating that he is adopting a “wait and see” approach towards future monetary policy decisions.
Looking ahead, the US economic calendar for the upcoming week includes key releases such as inflation figures, retail sales data, building permits, and speeches by Fed officials.
In summary, gold prices rallied amidst bleak US economic sentiment, fueled by a decline in consumer confidence and subdued labor market conditions. The outlook for the US Dollar remains uncertain as investors closely monitor upcoming economic data releases and Fed communications.