Weekly Fundamental Analysis Forecast – May 05, 2025
Gold prices extended their retreat midweek as investors continued to pare back safe-haven positions amid signs of renewed US-world trade engagement. The third straight session of losses reflects rising optimism that dialogue could defuse tariff tensions. Market sentiment was further bolstered by Trump’s executive orders to ease auto tariffs and his comments about potential deals with key Asian partners, including India, South Korea, and Japan. Traders are now watching for formal confirmation of US-China negotiations in the coming week. If Beijing responds positively to Washington’s offer to restart negotiations, improved risk appetite would come at the expense of gold, especially as yields and the dollar firm on. However, any stall or breakdown in talks, or renewed geopolitical flare-ups, such as in the Middle East or Ukraine-could swiftly restore safe-haven demand.
The US labor market showed signs of cooling in April, with nonfarm payrolls rising by 177,000 – a slowdown from March’s revised 185,000 figure and well below February’s earlier estimates. While still above the 133,000 jobs forecast by economists, the Bureau of Labor Statistics also revised down job gains for February and March by a combined 58,000, tempering the headline surprise. The unemployment rate held steady at 4.2%. However, federal employment fell by 9,000 in April, reflecting cuts driven by the Musk-led “department of government efficiency,” which has reduced federal headcount by 26,000 since the start of the year. The broader economic picture remains murky. For markets, the data is unlikely to shift the Fed’s cautious stance for the Wednesday meeting. With inflation still above the 2% target and no sharp deterioration in employment, the central bank is expected to maintain rates while monitoring downstream effects of tariffs on growth, prices, and labor.
Oil prices declined as traders took a cautious stance ahead of the May 5 OPEC+ meeting. Market participants are balancing expectations of an output increase against renewed geopolitical and macroeconomic headwinds. The softening came amid doubts over a meaningful resolution to the US-China trade standoff, which has weighed heavily on global growth sentiment. Traders are also reacting to fresh uncertainty stemming from Trump’s threat to impose secondary sanctions on countries importing Iranian crude, a move that could directly impact China – the world’s largest buyer of Iranian oil. Adding to the bearish tone, Saudi Arabia, the de facto leader of OPEC+, has reportedly told allies that it does not intend to support prices through additional supply cuts. This combination of rising supply and fragile demand outlook is fostering volatility across global energy markets. If the organization moves forward with easing output constraints, while global economic risks remain unresolved, oil prices could face continued downward pressure.
