Bullion faced selling pressure below the $5,000 level as market players saw a sharp drop, while closely monitoring the release of the US Consumer Price Index (CPI) inflation report for January.
At 9.20 am, gold prices were at $4,974, recovering 1.07% since it opened in early trading on Friday in the Asian session.
Concerns over the development of Artificial Intelligence (AI) triggered a massive sell-off in global financial markets. The pressure was also exacerbated by the risk of margin calls, which forced some investors to close positions to obtain immediate liquidity.
The exit move did not only involve equities, but also affected commodities including precious metals as investors sold holdings to cover cash needs.
At the same time, stronger-than-expected US (US) jobs data reinforced expectations that the Federal Reserve (Fed) would not rush to cut interest rates.
This prolonged high-rate environment has reduced the appeal of gold as the metal does not offer a yield return.
Latest data showed Non-Farm Payrolls (NFP) rose by 130,000 in January, after a revised 48,000 increase in December. The unemployment rate fell to 4.3% from 4.4% previously, reflecting a still-firm labor market.
Market attention now turns to the US Consumer Price Index (CPI) data due out on Friday. The headline and core readings are expected to rise 2.5% year-on-year for January.
If inflation shows signs of slowing, it could potentially revive expectations of a Fed rate cut and support a rise in precious metals prices in the near term. Conversely, persistently high inflation readings could continue to pressure gold and other risk assets.
