Gold heads for first weekly rise in five on easing Fed rate hike bets
Gold rose more than 1% on Friday and was headed for its first weekly gain in five, as investors dialled back expectations of Federal Reserve interest rate hikes following softer-than-expected U.S. jobs data.
Spot gold was up 1.4% to $4,179.94 per ounce, as of 0235 GMT, rising to its highest level since June 23. U.S. gold futures for August delivery gained 1.6% to $4,193.20.
Bullion was on track for a weekly gain of 2.3%, its first since the week of May 25, as weaker-than-expected nonfarm payrolls and private payrolls data tempered concerns around inflation and higher-for-longer interest rates.
The dollar was headed for a weekly drop, making greenback-priced bullion more affordable for holders of other currencies. [USD/]
"What we're seeing is a reduction in the pricing of the U.S. Federal Reserve rate hikes for the rest of this year, as well as Q1 next year, and that has been primarily driven by a rather lackluster U.S. labour market data yesterday," said Kelvin Wong, a senior market analyst at OANDA.
Nonfarm payrolls increased by 57,000 jobs last month, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing 110,000.
Traders are now pricing in roughly a 54% chance of a rate hike in September, down from 66% before the data, according to the CME FedWatch Tool. [FEDWATCH/]
Higher interest rates typically weigh on non-yielding gold, as they make interest-bearing assets more attractive.
However, "we have not seen a total erasure of rate hike pricing... by the end of the year, there could be still another leg of potential gold weakness coming into play," with prices potentially reaching the $3,500/oz level, said Wong.
Meanwhile, the World Gold Council said that central banks were back in buying mode in May and, based on the latest reported data, official gold reserves increased by a net 41 tons during the month.
Spot silver rose 2.3% to $62.43 per ounce, platinum gained 2.7% to $1,660.05, and palladium added 1.3% to $1,284.40. All three metals were at over one-week highs and headed for weekly gains.
