Gold traded slightly higher near $5,060 in early Asian trading on Thursday, holding above $5,050. It rose even after strong US jobs data. Traders are now focused on Friday’s US CPI inflation report.
Safe-haven demand supported gold as tensions between the US and Iran continued. Donald Trump said he wants talks with Iran to continue after meeting Benjamin Netanyahu. He also warned he may act against Tehran if no nuclear deal is reached.
Gold Market Caught Between Safe Haven Demand And Dollar Strength
US Nonfarm Payrolls rose by 130,000 in January, above the 70,000 forecast. December payrolls were 48,000 after a small downward revision. The unemployment rate fell to 4.3% from 4.4%, while markets had expected it to stay at 4.4%.
Kansas City Fed President Jeff Schmid said rates may need to stay restrictive to bring inflation down. He added that he is not seeing much slowdown in the data. Markets are watching Friday’s CPI release. Headline and core CPI are both expected to be 2.5% year on year in January.
Gold is being pulled in two directions. Ongoing US-Iran tensions are keeping safe-haven demand strong and helping support prices. At the same time, a stronger US dollar—backed by firm labour data—is weighing on gold.
This push and pull could lead to higher volatility, especially with CPI due on Friday. Some traders may prefer options strategies that benefit from a big move, such as a straddle. In this setup, positioning for movement may matter more than picking a direction.
Inflation Print Could Drive Next Big Move
Inflation has been hard to control in recent years, and surprise readings have often forced the Fed to stay tighter than markets expected. In the real world, the December 2023 CPI report showed core inflation at 3.9%, a reminder of how stubborn price pressures can be. If Friday’s CPI comes in above the 2.5% forecast, it would support the Fed’s restrictive stance and could push gold sharply lower.
However, the geopolitical premium keeping gold above $5,000 is also important. History shows that during periods of rising global tension, safe-haven buying can outweigh economic data. For example, during the early stages of the Russia-Ukraine conflict in 2022, gold rallied more than 10% in just a few weeks. If US-Iran talks break down, headlines could quickly become the main driver and lift gold further, even if US data stays strong.
The strong jobs report—130,000 new payrolls versus 70,000 expected—also gives the Federal Reserve more reason to keep rates high. Recent Fed comments support that view, noting limited signs of slowing. This environment can cap gains for a non-yielding asset like gold, even if inflation cools.
For now, the key risk is Friday’s CPI report. After that, traders will need to weigh the inflation trend against changes in the geopolitical situation. A flexible approach—able to switch from trading data to trading headlines—will likely be essential.
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