XAUUSD:Sellers take control after strong economic data in the US

Gold regained momentum and climbed to its highest since early January above $2,060 before falling sharply on Friday.

Comments from Federal Reserve (Fed) officials could influence precious metals pricing next week in the absence of much key economic data.

Gold increased more than 0.5% on Monday, benefiting from escalating geopolitical tensions and falling US government bond interest rates from the beginning of the week. News of a drone attack on a US base near Jordan's border with Syria that killed three people and injured more than 20 soldiers has raised concerns about the growing crisis in the country. Middle East.

On Wednesday, the Fed kept its policy rate unchanged at 5.25% - 5.5% as expected. In its policy announcement, the Fed completely ruled out the possibility of additional tightening and only talked about monitoring more data to evaluate the next move.

This has put the USD under downward pressure and helped XAU/USD move higher. However, in the following press conference, Fed Chairman Jerome Powell said that the bank would not consider cutting interest rates at the March meeting. After this comment, Wall Street's main indexes fell sharply. and help the USD regain its strength. Powell also said they could cut interest rates sooner if they see unexpected weakness in the labor market.

After the Fed meeting, US government bond yields fell sharply in the US session on Thursday and pushed gold higher. The 10-year US government bond yield fell more than 2% to below 3.9% while XAU/USD increased above $2,060. The US Department of Labor said there were 224,000 initial applications for unemployment benefits, higher than market expectations of 212,000. In addition, ISM's Manufacturing PMI index improved from 47.1 to 49.1, with the Employment index decreasing from 47.5 to 47.1.

On Friday, Gold fell sharply and reversed most of the gains following the January jobs report. NFP data increased by 353,000, well above market expectations of 180,000. Additionally, annual wage inflation has increased to 4.5%. The 10-year US government bond yield later recovered to 4% and XAU/USD dropped below $2,030.

ISM will release the January Services PMI report on Monday with an expected increase from 50.6 to 52.0 in December. The Employment Index fell sharply from 50.7 in November to 43.3 in December, indicating that the sector's payrolls The service sector is declining. This decline could pressure the dollar, while a recovery to 50 or above could boost the greenback.

The economic calendar next week does not have many important events for Gold traders. Instead, traders will focus on statements from Fed officials.

Although Powell has essentially ruled out a rate cut in March, the FedWatch Tool shows that markets are still pricing in a 20% probability of a bank pivot at the next meeting. The USD is likely to appreciate in case Fed officials continue to reject this expectation. On the other hand, XAU/USD could regain traction if policymakers leave open the possibility of cutting interest rates next month. However, that is unlikely to happen after the impressive jobs report.