Gold prices climbed on Thursday as weaker-than-expected US employment figures and declining oil prices relieved some inflation worries. Investors are now closely watching the nonfarm payrolls report to determine the Federal Reserve’s next steps. Spot gold increased 1.1% to US$4,074.65 per ounce by 0620 GMT, hitting its highest level since June 23.
Bullion rebounded from a more than seven-month low to close higher on Wednesday. The prior session’s data showed private employment rose by 98,000 jobs in June. This figure fell short of the 118,000 jobs that economists had predicted. The discrepancy suggests the broader labor market might be cooling faster than anticipated.
“The market’s cautious about being short down here because you’re seeing a couple of probes to the downside, which are quite rapidly being rejected,” said Nicholas Frappell, global head of institutional markets at ABC Refinery. He noted that the ADP data came in a little bit lower than forecast. This likely explains the rally, as some investors believe the private sector numbers will be reflected in the official nonfarm payrolls data.
Fed chair Kevin Warsh said on Wednesday that inflation expectations and risks have come down in recent weeks. He reiterated the central bank’s commitment to bringing inflation down to its 2% goal. Traders are currently pricing in roughly a 66% chance of a rate hike in September, according to the CME FedWatch tool. The June nonfarm payrolls data, due at 1230 GMT, could significantly shape these expectations.
Oil prices also fell after Iran and the United States concluded a round of indirect talks focused on the Strait of Hormuz. While the talks concluded, they made little headway toward a lasting peace. Raised oil prices can stoke fears over inflation. Gold is traditionally seen as a hedge against inflation, though it loses its appeal in a high interest-rate environment.
Spot silver rose 1.5% to US$60.03 per ounce. Platinum gained 2.4% to US$1,614.80. Palladium climbed 2.1% to US$1,234.89. The gains in these precious metals followed the rally in gold. Market participants are balancing the immediate impact of the jobs report against the longer-term outlook for monetary policy. The upcoming data release remains a key driver for trading activity in the sector.
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