The Gold price (XAU/USD) weakens to just above the $2,300 level during the US session on Tuesday, on the back of a positive market mood denting safe-haven demand for Gold and data from the US showing a rise in employment costs that could have negative implications for inflation and interest rates going forward.  

Markets in Asia-Pacific closed on the whole in positive territory, with the Nikkie posting a 1.24% gain, Australia’s ASX200 up 0.35% and the Hang Seng rising 0.1% at the close. Caixin Chinese Manufacturing PMI hit a 14-month high in April whilst in Europe, French and Spanish GDP growth pre-empted a higher-than-expected rise in the Eurozone Q1 GDP, data showed on Tuesday. 

The US Dollar (USD) – which is negatively correlated to Gold price – also rose after the release of the US Employment Cost Index showed a 1.2% rise in Q1, data from the US Bureau of Labor Statistics (BLS) showed on Tuesday. The data beat expectations of a 1.0% increase and the 0.9% of the previous quarter.  

It is another indication of persistent inflationary pressures in the US economy. Higher employment costs are a sign of rising wages and often result in higher inflation. This in turn could persuade the Federal Reserve (Fed) to further delay the time when it decides to reduce interest rates, which is likely to appreciate the USD since higher interest rates for longer lead to greater capital inflows.