World Gold Prices Drop Ahead of US NFP Payroll Data

Gold prices are trading lower in international and domestic markets as investors remain cautious ahead of the release of US non-farm payroll data on April 7.

However, even though gold prices are currently in the red, experts say that market fundamentals are still favorable for the yellow metal and gold prices are nearing all-time highs.

It is worth noting that the US non-farm payroll data is one of the key economic indicators used to gauge the health of the US labor market.

The Reserve Bank of India (RBI) on April 6 decided to keep interest rates unchanged at 6.5 percent, despite earlier expectations of a 25 basis point rate hike.

The pause in the rate hike cycle is expected to create more liquidity in the market and support gold and silver investments.

Also, after a pause in gold purchases in January, the RBI resumed buying three tonnes of gold in February.

This took the central bank’s holdings of the precious metal to around 790 tonnes, according to data from the World Gold Council.

The RBI's gold buying policy shows that the Indian central bank views gold as an important asset in the country's foreign exchange reserve portfolio.

An interest rate hike usually has a negative impact on gold prices as it increases the cost of holding non-interest bearing assets like bullion.

However, with the RBI's decision to keep rates unchanged, it is expected to boost demand for gold and silver in the market.

In addition, the RBI's gold purchases could also provide a positive signal for the gold market and increase investor confidence in the precious metal as a safe haven asset.

At 10:47 am, the June gold contract price on the Multi Commodity Exchange (MCX) was trading around Rs 60,639 per 10 grams, down 0.4 percent, while the Comex gold price was trading at Rs 2,028.80 per troy ounce, down 0.3 percent from its previous close.

However, Ed Moya, a senior market analyst at OANDA Americas, said in a note that the gold rally is likely to be short-lived before it tries to reach record highs again.

This is due to high demand for safe-havens, as the risk of a recession has not been this high in decades, banking concerns remain, and there is excessive pessimism about equities.

Investors will be watching the release of US non-farm payrolls data, as it shows the number of jobs in the country's economy.

In addition, the US ADP employment change data showed that the private sector created 145,000 jobs in March, which was below analysts' expectations of 261,000.

If the US non-farm payrolls data comes in below expectations, it could signal a slowdown in the labor market, which could support demand for safe-haven assets such as gold.

US non-farm payrolls data is usually one of the most important economic data releases on a regular basis, as it can provide insight into the strength and health of the US economy as a whole.

This data includes information on the number of jobs created or lost in the non-farm sector, including both the private and public sectors.

If the data shows an increase in the number of jobs, it could be a positive signal for the US economy, which could encourage investors to take risks and reduce demand for safe-haven assets such as gold.

Conversely, if the data shows a slowdown or decline in the number of jobs, it could increase demand for safe-haven assets such as gold, as investors seek protection from economic uncertainty.

A slowdown in the labor market could prompt the US Federal Reserve to think about a pause in the future interest rate cycle.

This could affect gold prices, as lower interest rates can increase demand for safe-haven assets such as gold, which is considered a hedge against inflation and economic uncertainty.

In addition, analyst Praveen Singh expects gold to trade in a range between $2,000 and $2,030 (on COMEX), as bulls (optimistic investors) are trying to reach a record high of $2,075.

A constructive outlook amid concerns about an economic slowdown could also be a supporting factor for gold prices.

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