Gold Rally Fades as Strong US Jobs Data Fuels Rate Hike Fears

Gold prices pared earlier gains on Wednesday after robust US jobs data reinforced expectations that the Federal Reserve will keep interest rates higher for longer. The Bureau of Labor Statistics reported that US job openings surged in April to the highest level in nearly two years, while layoffs declined. The data added to signs of a resilient labour market, a key factor that could keep the Fed from cutting rates soon.

Traders are also watching developments in the Middle East for clues on a potential ceasefire deal. The ongoing war has roiled global financial markets. According to Rhona O'Connell, head of market analysis for EMEA and Asia at StoneX Financial Ltd., the outlook for gold remains tied to events in the region. 'Although some progress has been made, the key issues remain unresolved, meaning that prices are likely to remain range-bound, potentially with a downward bias on the back of interest-rate expectations,' she said in a note.

Gold fell sharply after the conflict began in late February. It remains about 15% below its pre-war level, though it has traded in a narrow range in recent weeks. A resumption of energy and trade traffic through the Strait of Hormuz would ease concerns about rising consumer prices. That would make it more likely that central banks will loosen monetary policy. Lower borrowing costs are a tailwind for gold, which does not pay interest.

Spot gold rose 0.1% to $4,489.67 an ounce at 4:35 p.m. in New York. Silver gained 0.4% to $75.18 an ounce. Platinum and palladium also advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed.