Gold rebounds above $4,100 despite strong US NFP data

Gold prices rose above $4,100 on Monday, recovering some lost ground in early Asian trading hours. Speculation that incoming Democrats in Congress would oppose funding for the Iran war fueled demand for the yellow metal. Democrats, who secured majorities in both the House and Senate, are strongly opposing President Trump's proposed $1.5 trillion defense budget and are determined to prevent its passage.

They plan to only approve a budget figure around $1 trillion, unwilling to continue funding the war against Iran. While the potential upside for gold may be limited due to stronger-than-expected US jobs data, which could boost the US Dollar and Treasury yield, the recent rebound in oil prices and stabilization in the Dollar provided some support for gold.

However, the deepening selloff in AI and semiconductor stocks may cause caution in the near term, as investors may seek to raise cash. Despite the sharp equity selloff, gold's relative resilience is encouraging, and it may gradually regain some of its safe-haven appeal amid market turbulence. Analysts expect some consolidation before the US payrolls report, with softer employment data potentially tempering Fed tightening expectations and weighing on yields and the US Dollar, allowing gold's recovery to extend.

The next key data point is Tuesday's US Consumer Price Index (CPI) report, and oil prices remain an important driver of inflation and rate expectations. Gold has historically been used as a store of value and medium of exchange, and today it is widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies.

Central banks are the largest holders of gold, often diversifying their reserves to strengthen their economies and currencies during turbulent times.