Gold prices edged lower on Monday after the release of robust U.S. jobs data for March. The better-than-expected employment growth fueled optimism for a quick economic recovery, which in turn lifted both the global stocks and U.S. Treasury yields. The dollar remained firm against rival currencies that made the bullion more expensive for investors using other currencies.
Spot gold is currently trading at $1,727.28 per ounce as of 0826 GMT.
The U.S. Labor Department reported on Friday that non-farm payrolls grew by 916,000 jobs in March. It is the biggest monthly gain in seven months. The revised data for February also showed the addition of 468,000 jobs. The economy added a total of 1.6 million in the first quarter which is the best two months of job growth in any administration in U.S. history and could be the start of the best economic performance in almost 40 years.
The employment growth is attributed to the rollout of pandemic relief money and the vaccination of more Americans against COVID-19. It pushed global stocks to a six-week peak and lifted the benchmark U.S. Treasury yields close to a 14-month high.
DailyFX strategist Margaret Yang noted the bearish trend for gold due to the global economic recovery. But some European Union countries are struggling with the third wave of COVID-19. French Minister of the Economy and Finance Bruno Le Maire admitted that new coronavirus restrictions would hinder economic growth.
Jeffrey Halley, a senior market analyst at OANDA, concluded that the pricing of the yellow metal is affected less by inflation expectations and more by the movement of benchmark 10-year U.S. Treasury yield.
U.S. President Joe Biden announced the details of his American Jobs Plans on Wednesday. It has raised some concerns about inflation. Market participants consider the bullion as an inflation hedge, but higher government yields challenged that status.
A March 31-April 1 Reuters/Ipsos poll found Biden’s $2 trillion-plus infrastructure initiative is widely popular. But public support weakens when it is inserted into a Democratic bill and pushed a Biden-backed plan. Senate Minority Leader Mitch McConnell even called the initiative “another Trojan horse for far-left demands.”
In a related development, the U.S. Commodity Futures Trading Commission (CFTC) reported that hedge funds and money managers cut their bullish stance in gold COMEX gold contracts last week.