US Economic Data Prompts Dollar Weakness

The US economy presented a mixed picture as April's nonfarm payrolls report surpassed expectations, yet the US Dollar weakened following the release. This was coupled with data showing a significant drop in consumer sentiment to a record low in early May. Federal Reserve officials, including Chicago Fed President Goolsbee, commented that the job market appears stable and is not showing signs of falling apart, with market focus shifting towards the inflation path.

Middle East Tensions Underpin Risk Premium

Geopolitical tensions are a key focus for markets following reports of US military operations involving vessels in the Gulf of Oman and near the Strait of Hormuz. These developments are supporting gold prices and have created a persistent risk premium in oil markets, with price movements being heavily influenced by headlines related to the conflict.

Gold Demand Supported by Investors and Central Banks

Gold demand fundamentals showed strength from both investors and official institutions. Inflows returned to global gold-backed ETFs in April, with UK-based funds leading the renewed interest as prices stabilized. Separately, central bank buying continues to be a supportive factor, as the People's Bank of China reportedly extended its gold purchasing streak to 18 months.

Mixed Economic Signals from Canada and Europe

Economic data outside the US showed signs of weakness, particularly in Canada, where the unemployment rate rose to a six-month high after a drop in full-time jobs. This softer labor data weighed on the Canadian dollar and reinforced views that the Bank of Canada will remain on hold. Meanwhile, Germany's industrial sector slump deepened, and analysts note that war-driven inflation concerns are keeping potential ECB rate hikes in focus.