Gold recovers as dollar loses ground

Gold prices rose in European trade on Monday for the first session in three days away from four-week lows, as the dollar lost ground against major rivals.

Recent disappointing US labor data boosted the odds of two Fed interest rate cuts this year and in turn underpinned gold prices. 

Gold is underpinned as well by concerns about mounting geopolitical tensions in the Middle East as Israel-Hamas ceasefire talks crumble.

Prices 

Gold prices rose 1% to $2324 an ounce, with a session-low at  $2291, after losing 0.1% on Friday, the second loss in a row, plumbing four-week lows at $2277 an ounce as risk appetite improved. 

Gold prices lost 1.5% last week, the second weekly loss in a row on profit-taking off record highs.

The Dollar

The dollar index fell 0.1% on Monday, extending losses for the fourth straight session and hovering near three-week lows against a basket of major rivals. 

The decline comes ahead of US payrolls data for April, which missed expectations and reduced pressure on the Fed, while opening the door for multiple interest rate cuts this year. 

 US Labor Sector 

The US government reported the addition of 175 thousand new jobs to the economy in April, down from 315 thousand in March, while analysts expected the addition of 240 thousand jobs. 

US unemployment rose to 3.9% last month from 3.8%, however it remains below 4% for the 27th month in a row.

Following the data, the odds of a Fed 0.25% interest rate cut in June rose to 20% according to the Fedwatch tool, while the odds of such a cut in July rose to 45%. 

Now investors expect two interest rate cuts by the Federal Reserve this week. 

Prices Forecast 

Analysts at several consultancy firms, including IG and Owanda, noted that as geopolitical tensions flare once again in the Middle East, while the odds of early Fed interest rate cuts this year mount, gold prices are expected to gather momentum in the weeks to come. 

The SPDR

Gold holdings at the SPDR Gold Trust rose 0.87 tonnes on Friday to a total of 830.47 tonnes, away from April 17 lows.