Gold prices have rebounded moderately during the second half of May but are still down more than 10% from the March high. The geopolitical haven built into the metal in the wake of the Ukraine wat has begun to calm down, with traders becoming increasingly less sensitive to war headlines.
Another bearish momentum has been the movement in real bond yields. As an example, the 10-year TIPS has climbed from -0.5% in early April to a multi-year high near 0.30% on May 11th, before settling around 0.10% heading into this month’s close.
Looking ahead, starting with the Memorial Day holiday on Monday, the US calendar will be packed with high-impact events that could trigger strong price volatility, involving ISM manufacturing, the nonfarm payrolls (NFP), and ISM services, all for April. All three reports are expected to show some slowing compared to the March numbers. If results surprise to the downside in relation to the consensus forecasts, recession fears could continue to rise, translating those worries into a calmer outlook for interest rates and, perhaps, a weaker US dollar. This scenario could benefit gold heading into June.
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