Gold hovered above the US$5,000 level during Monday's Asian deals as investors positioned for a pivotal week dominated by key United States economic data and evolving expectations for Federal Reserve policy.
By 3:55 pm AEDT (4:55 am GMT), spot gold was trading 1% higher at US$5,015.29 per ounce.
The precious metal’s rebound has been underpinned by renewed reflationary trades following Japan’s snap election. The ruling Liberal Democratic Party’s majority victory has strengthened expectations of debt-funded fiscal stimulus, lifting broader risk appetite and reinforcing inflationary narratives that tend to favour gold as a hedge.
Dovish sentiment surrounding the Federal Reserve has also resurfaced. After softer U.S. labour market data last week, markets continued to price in the first Fed interest rate cut of the year in June.
Expectations for monetary easing have strengthened despite mixed views among investors regarding the policy stance of Fed Chair nominee Kevin Warsh.
Attention now turns squarely to the delayed January nonfarm payrolls report, due on Wednesday, followed by the consumer price index data on Friday.
Both releases were postponed and are expected to play a critical role in shaping near-term Fed expectations and broader market direction.
While the macro backdrop has turned more supportive for gold, momentum remains measured. Risk sentiment has improved on expectations of expansionary fiscal policy in Japan, with Japanese equity indices surging to record highs and lifting Asian markets.
The firmer tone in equities has tempered safe-haven demand, limiting the pace of bullion’s advance.
As the week unfolds, traders may adopt a more cautious stance ahead of the U.S. data, potentially leading to repositioning and heightened volatility.
Whether gold can secure sustained acceptance above US$5,000 will likely depend on whether upcoming jobs and inflation figures reinforce the case for policy easing and a softer U.S. dollar in the months ahead.
