Investing.com -- Gold prices were muted on Monday, reeling from sharp losses in the prior session as hotter-than-expected U.S. labor data fueled concerns over a hawkish Federal Reserve, with focus now turning to key inflation data due this week.
Bullion prices retreated sharply from record highs on Friday after much stronger than expected nonfarm payrolls data showed that the U.S. labor market was running strong despite rising interest rates.
A strong labor market is expected to factor into stickier inflation, which could result in the Federal Reserve keeping interest rates higher for longer - a scenario that bodes poorly for non-yielding assets.
Risk appetite also improved as the payrolls reading indicated some resilience in the U.S. economy, sparking a rally in stock markets and pressuring gold.
But gold prices still held above the $2,000 an ounce mark, benefiting from steady safe haven demand as a string of U.S. bank collapses underlined the increasing economic pressure from high interest rates. Markets are bracing for a potential U.S. recession this year.
Spot gold was flat at $2,018.38 an ounce, while gold futures were flat at $2,025.90 an ounce by 20:37 ET (00:37 GMT). Both instruments fell sharply on Friday after briefly hitting record highs earlier in the week.
Focus this week is now on U.S. consumer price index inflation data, due on Wednesday, to gauge whether rising interest rates have been able to make a dent in elevated price pressures.
The data is expected to show that while inflation eased further in April, it still remained well above the Fed’s 2% target range - giving the central bank more impetus to maintain high interest rates for longer.
Still, markets are largely pricing in the possibility that the Fed is done with its rate hike cycle and likely reached peak rates with a 25 basis point hike last week. Fed Fund futures prices show that markets are pricing in a 90% chance that the bank will hold interest rates steady in June, although the hotter-than-expected labor market data saw traders scaling back bets for a rate cut this year.
Other precious metals moved little on Monday, after steep losses in the prior session.
Among industrial metals, copper prices were flat, but saw some gains in the prior session as the labor data still pointed to some resilience in the U.S. economy.
Copper futures fell slightly to $3.8890 a pound.
Focus this week is now on a slew of economic indicators from China, the world’s largest copper importer. Markets are awaiting trade and inflation data for April to gauge the strength of an economic recovery in the country.