Gold traded close to the USD 5,100 level on Friday, caught between two opposing forces.
On one hand, the precious metal continues to benefit from its traditional role as a safe-haven asset amid a tense geopolitical backdrop.
On the other hand, rising inflation concerns, fuelled by higher oil prices, are affecting the outlook for monetary policy and limiting further upside.
While gold-backed ETFs recorded inflows of around 37 tonnes last week, a notable rebound from the modest 2.5 tonnes registered in the previous week, the metal could continue to see large inflows amid persistent geopolitical tensions in Eastern Europe and rising risks in the Middle East.
However, the macro environment is creating some headwinds. Elevated energy prices combined with resilient US economic data have pushed markets to reassess expectations for Federal Reserve monetary policy easing. Markets now largely price in only one rate cut this year, a shift that has lifted treasury yields to multi-week highs and weighed on gold.
In the near term, attention turns to the US nonfarm payrolls report. Labour market data could significantly influence interest rate expectations and, in turn, gold’s next directional move.
