Gold Poised for Weekly Gain as Weak US Jobs Data Dulls Rate Hike Expectations
Gold has exhibited a notable increase on Friday, set to register a weekly gain after four consecutive weeks of declines. Spot gold climbed by 1.3% to $4,174.21 per ounce, marking its highest point since June 23. This ascent can be attributed to weaker-than-expected U.S. jobs data, which has tempered market expectations for an imminent Federal Reserve rate hike. Similarly, U.S. gold futures for August delivery experienced a rise of 1.5%, settling at $4,186.80 per ounce. The data revealed that nonfarm payrolls rose by only 57,000 last month, significantly below the anticipated figure of 110,000, indicating a cooling labor market and dampening prospects for monetary tightening in the near term.
The reaction in the gold market appears justified, given the shift in investor sentiment regarding future Federal Reserve rate changes. Current assessments suggest a 54% probability of a rate increase in September, a decline from 66% prior to the labor data release. Lower interest rates typically diminish the opportunity cost associated with holding non-yielding assets such as gold, bolstering its appeal amidst a less favorable economic outlook. Concurrently, the U.S. dollar is poised for its most substantial weekly loss since April, contributing to lower prices for gold in terms of foreign currencies and attracting international buyers.
Moreover, prevailing trends within central bank gold reserves further support bullish sentiment. The World Gold Council indicated that central banks added a net 41 metric tons of gold in May, reflecting sustained demand in the face of recent currency pressures. However, some central banks have also liquidated portions of their gold holdings to bolster their currencies, a trend worth monitoring as it could influence future demand dynamics. In terms of physical market activity, while gold demand in India has softened as prices climbed, there has been a slight uptick in buying interest from China, illustrating variable regional demand amidst fluctuating price levels.
In addition to gold, other precious metals have shown robust performance. Spot silver rose by 1.9% to $62.19 per ounce, platinum gained 2.3% to reach $1,653.30, and palladium increased by 0.8% to $1,278.36, each on track for weekly gains. These developments reinforce the view of a broader recovery in precious metals, appealing to investors seeking to capitalize on the current macroeconomic backdrop characterized by uncertainty in monetary policy and currency valuations.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)