Gold prices are on track for their first weekly increase in five weeks, boosted by weaker-than-expected job market statistics in the United States, which has dampened prospects of another near-term Federal Reserve interest rate hike. The softer outlook for monetary policy has pushed the US dollar and Treasury yields lower, producing a good situation for bullion.
What happened?
Nonfarm payrolls in the United States expanded by only 57,000 jobs in June, well below economists’ projections of approximately 110,000.
Following the data, traders cut the likelihood of a September Federal Reserve rate hike from approximately 66% to 54%, according to CME FedWatch.
The US dollar fell, making gold cheaper for customers using foreign currencies.
Lower Treasury yields decreased the opportunity cost of owning non-yielding assets like gold.
Gold market reaction
Spot gold prices rose to roughly $4,175-4,185 per ounce, their highest level since late June.
US gold futures also rose above $4,186 per ounce.
The metal has gained more than 2% this week, snapping a four-week losing skid.
Additional support from central banks.
Aside from the jobs statistics, structural demand remains robust:
The World Gold Council announced that central banks added a net of 41 metric tons of gold to their reserves in May.
Analysts believe that official-sector purchases will continue to be a key long-term underpinning for gold prices, even if some governments sell reserves to stabilize their currencies.
Other precious metals.
The optimistic feeling spread throughout the precious metals complex:
Silver gained by roughly 2.6%.
Platinum gained approximately 2.7%.
Palladium advanced by about 0.7%.
All three metals were likewise poised for weekly gains.
What investors should watch
For gold investors, the next big catalysts include:
The upcoming US inflation statistics and whether it signals a faltering economy.
Federal Reserve communications about the interest rate outlook.
Changes in the US dollar and Treasury yields.
Central banks continue to buy gold.
This bounce is encouraging for investors in gold mining stocks, particularly junior miners, but one bad jobs data does not signal the start of a new bull market. Sustained gold gains will most likely require further evidence of weakening US economic growth or a more dovish Federal Reserve posture.
