Gold is trading with a bullish bias thanks to inflation concerns. According to economists, in January, inflation in the United States may reach a 40-year high.
Gold ended last week in the black. Its weekly gains totaled 1.2%, notching the sharpest rise in a week since November 12.
Its growth was facilitated by labor market stats. On Wednesday, the ADP report was published.
Private payrolls declined by 301,000 due to the spread of the Omicron strain in January. This was the strongest drop since the beginning of the pandemic.
Economists had expected Friday's NonFarm Payrolls report to be also weak. However, the forecast did not come true. The indicator jumped by 467,000 versus the forecast reading of 150,000.
"An unexpectedly optimistic report increased the likelihood of an aggressive stance on monetary policy by the Fed," analyst Edward Moya said.
The prospect of a faster pace of monetary policy tightening boosted the US 10-year government bond yields. On Friday, US Treasures reached the highest level since December 2019.
Meanwhile, the US dollar regained ground, which helped gold to jump higher. At the end of last week, gold rose by 0.2% or $3.70 to $1,807.80.
On Monday morning, gold is moving within its Friday trajectory. Thus, at the time of writing this article, the quotes added 0.2%, approaching $1,812.10.
According to analysts, the precious market is likely to climb amid inflation concerns, which may trigger volatility in the US stock market.
The Consumer Price Index for January will be published this week. Analysts believe that the indicator will grow by 0.5% and reach 7.3% in annual terms. If this scenario comes true, it will be the largest increase in inflation since 1982.
Another factor that bolsters demand for gold is the tense geopolitical situation. On Saturday, US officials reported that Russia has in place about 70% of the combat power that may be required to invade Ukraine.
At the same time, the Russian government stated that it does not plan an invasion. However, it may take measures if its security requirements are not met.
Experts believe that the escalation of the Russian-Ukrainian conflict will continue to boost investors' appetite for gold and other safe-haven assets in the short term.