Gold prices rise regardless, what is happening in the market?

The breakdown in the correlation between gold, the US dollar and bond yields last Friday may be sending an important message to the market, according to one analyst.

Gold initially fell sharply after the positive jobs data was released, losing about $10 an ounce. However, the precious metal quickly recovered within 30 minutes, not only making up for the losses but also reaching a session high, approaching $2,700 an ounce. Spot gold was last trading at $2,693.70 an ounce, up nearly 1% on the day.

In an interview with Kitco News, Kathy Lien, Director of FX Strategy at BK Asset Management and co-founder of BKForex.com, said that when trading major news events, traders should wait 5 to 15 minutes to determine the true direction of the market.

Although jobs data showed 256,000 jobs were created last month, pushing the unemployment rate to 4.1% and exceeding economists' expectations, Ms. Lien said that was not enough to drag gold prices lower.

Before the data was released, the market had expected that the US Federal Reserve (FED) would keep interest rates unchanged at its meeting later this month.

Expectations for the Fed's easing path continued to tilt more hawkish after minutes of the December monetary policy meeting revealed that some policymakers still viewed interest rates as approaching neutral levels, as the US economy and labor market remained relatively stable.

Ms. Lien noted that the gold price move reflects broader risk-off sentiment in the stock market. Despite the positive economic data, the S&P 500 fell 85 points, or more than 1%, to last trade at 5,832.

“I think the price action in gold reflects what is happening in the equity markets, where traders are worried about rising US bond yields and the implications for borrowing costs and economic growth. If the Fed doesn’t cut rates sooner this year, it will cause more pain later,” she said.

Although gold prices are expected to remain volatile in 2025 due to the impact of US monetary policy and demand for safe-haven assets, Ms. Lien said she is still looking for trading opportunities on the upside.

“Overall, I am bullish on gold this year and will look to buy rather than sell,” she said. “I will wait for a deeper correction to buy. I would like to buy lower, closer to $2,600.”

While a strong US dollar and higher bond yields are short-term risks for gold, Lien predicts safe-haven demand will be a bigger factor this year.

“The threat of trade wars, tariffs and all the geopolitical uncertainty will keep investors on their toes. That will create ongoing risks for equities, and I think all of that will be positive for gold,” she said.

Looking at the price action, Ms. Lien said she would not be surprised if gold tested support around $2,500 an ounce. However, on the upside, she predicted prices could hit $3,000 an ounce.