Rising government bond yields have been one of the main obstacles for gold. Since October, the 10-year yield has risen from 3.599% to 4.631%, reflecting inflation concerns and strong economic performance. The dollar has followed a similar path, with the US Dollar Index reaching 108.541. A strong dollar reduces the appeal of gold by raising its cost in other currencies.
Should the NFP report indicate a weakening in the labor market, yields could fall, easing some of the pressure on gold. Conversely, stronger job growth could push yields higher, which could reinforce the current bearish sentiment toward gold. This relationship between the labor market, interest rates and the dollar will be critical in shaping gold’s performance in the coming weeks.
Political and geopolitical factors continue to play a role
Investors also keep a close eye on political developments. Newly elected President Donald Trump’s proposed tariffs and economic policies are widely expected to add to inflationary pressures, which could support gold as an inflation hedge. Geopolitical tensions in Eastern Europe and the Middle East continue to increase gold’s appeal as a safe haven.
Weekly Outlook: Gold Poised for Volatility
Gold’s performance in the coming week will be highly dependent on economic data and bond market trends. If the NFP report delivers a negative surprise, gold could rise as interest rates decline. Conversely, strong labor data could push interest rates higher and keep gold under pressure. While the broader picture for gold remains positive, near-term price action will depend on the direction of rates and the dollar.
Traders should remain alert to moves in the Treasury market and Fed policy updates as these will be key drivers of gold prices ahead of the Fed’s next meeting.