GOLD Price Remains Defensive Amid Recession Fears and Geopolitic

During the early hours of Good Friday, the XAU/USD remains defensive at $2,007 after experiencing the largest drop in two weeks. The lack of liquidity driven by the holiday and caution ahead of the top-tier United States employment data for March is restricting XAU/USD movements. Furthermore, the fear of a recession is also affecting the Gold price, even though the US Dollar is struggling to recover, mainly due to the downbeat US statistics.

The consecutive weakness in the United States data and downbeat US Treasury bond yields led to fears of a recession in the world’s largest economy. As a result, the Gold price recently experienced the biggest daily loss in nearly two weeks, ending a three-day uptrend.

The latest US employment data showed that the US Initial Jobless Claims improved to 228K, whereas the Challenger Job Cuts for March rose to 89.703K from 77.77K prior. Furthermore, the US JOLTS Job Openings dropped to a 19-month low in February, and the ADP Employment Change for March disappointed markets with 145K figures. Additionally, the US ISM Services PMI for March also dropped to 51.2 versus 54.5 expected and 55.1 prior, amplifying pessimism.

Reuters recently flagged fears of a recession by citing the Federal Reserve (Fed) Chairman Jerome Powell’s preferred bond market indicator’s latest slump. The news reported, “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction.”

Wall Street is licking its wounds, and the US 10-year and two-year Treasury bond yields are also staying pressured, despite the latest consolidation around 3.30% and 3.83% in that order. Due to the looming fears of a recession, Gold traders will have to closely examine the incoming US employment data to trade better.

Moreover, escalating geopolitical fears surrounding the US, China, Russia, and North Korea also seem to poke XAU/USD prices. China’s criticism of the US-Taiwan ties and dislike of the White House competition hints at worsening relations among the world’s top two economies. The same should weigh on the Gold price, considering China’s status as one of the world’s biggest Gold consumers, as well as due to the likely US Dollar’s haven demand. In addition, the Ukraine-Russia war and Moscow’s tussle with the West, as well as North Korea’s warning to use nuclear powers, also roil the geopolitical context and prod the Gold buyers.

In contrast to the aforementioned catalysts, the latest moves in the market against the US Dollar’s reserve currency status seem to allow the Gold price to stay on the bull’s radar amid the downbeat greenback. Russia’s latest likes for the Chinese Yuan and the China-Brazil pact to ignore the US Dollar as an intermediate currency challenge the greenback’s imperial status. Adding strength to the Gold’s likelihood are the chatters that some of the US Congressmen have proposed a Gold Standard Restoration Act to defend the US Dollar. The bill suggests re-pegging the greenback with a fixed amount of the Gold’s weight, like it was before 1971.

Looking forward, the Gold price relies on how the United States employment data arrives for March, especially amid recession woes and receding hawkish Fed bets. The market forecasts suggest a softer print of the headline Nonfarm Payrolls (NFP), to 240K from 311K prior, as well as no change in the Unemployment Rate of 3.6%. However, the mixed expectations for the Average Hourly Earnings make the outcome even more interesting for Gold