Gold prices rose on Friday to near a one-week high, heading for a weekly gain. Investors are now focused on US jobs data, which could influence the size of the Federal Reserve’s expected rate cut this month. Bullion typically performs better in a low-interest-rate environment, as it is considered a safe-haven asset during times of economic uncertainty.
Bets on a 50 basis point rate cut by the Fed on September 18 have risen to 41%, up from 34% a week ago. The Investing Saudi Arabia US Interest Rate Watch tool indicates this increase. The US non-farm payrolls data, due at 15:30 Riyadh time, could provide further clarity on this outlook.
“Gold prices are likely to rise slightly if the non-farm payrolls report shows weakness in the labor market. However, the market could see bouts of volatility. Prices seem poised to test new highs,” said Sugandha Sachdeva, founder of SS Wealth Street Research in New Delhi.
Gold prices have hit record highs this year, up about 22% so far. Election dynamics and expectations of interest rate cuts appear to have boosted gold, as evidenced by options positions, according to the World Gold Council’s monthly report.
Data on Thursday showed that private sector employers in the United States hired the fewest workers in three and a half years in August. At the same time, the number of Americans filing new claims for unemployment benefits fell last week. According to the monthly ADP report, the U.S. private sector added 99,000 new jobs in August, the slowest pace of employment growth since January 2021.
Gold prices rise as the dollar and bond yields fall
Gold at settlement: Gold prices added new gains during trading on Thursday, supported by a decline in the dollar and U.S. Treasury yields. Markets were particularly interested in economic data showing a slowdown in the labor market, which reinforced expectations of a Federal Reserve rate cut. At the settlement of transactions, December gold futures rose 0.7%, or $17.1, to $2,543.10 per ounce, after touching $2,554.
Gold and dollar movement: Spot gold rose 0.1% to $2,519.36 per ounce, after recording a one-week high of $2,523.29 in the previous session. The precious metal recorded gains of 0.6% during the week. On the other hand, gold futures rose 0.3% to $2,549.30. In contrast, the dollar index fell 0.24% to 100.83 points.
Other metals performance: Spot silver recorded a decrease of 0.1% to $28.8. “The silver market is expected to be in a persistent deficit, with the deficit expected to widen by 17% this year, creating a potentially bullish scenario for the metal,” Sachdeva said.
Platinum rose 0.9% to $932.55, while palladium fell 0.3% to $938.13, heading for a weekly loss.
Top Gold Buyers: Poland topped the list of buyers during the month, with the Polish central bank adding a net 14 tonnes to its reserves. This represents the bank’s largest monthly increase since November 2023, bringing its total reserves to 392 tonnes, or 15% of its total reserves. Uzbekistan added 10 tonnes of gold for the second month in a row, bringing its central bank’s total reserves to 375 tonnes. India also increased its reserves by 5 tonnes in July, bringing its net gold purchases since the beginning of the year to 43 tonnes, boosting its reserves to 846 tonnes.
Gold purchases in July
July saw a significant increase in central bank gold purchases, despite the metal’s high prices. The increase reinforces expectations that demand for gold as a safe haven will continue in times of instability.
According to the World Gold Council’s report released on Tuesday, global central banks added a net 37 tons to their official reserves. This represents a 206% increase compared to the previous month, and is the highest monthly increase since January, when banks added 45 tons.
Reasons for the price increase: Record central bank purchases in the first quarter of 2024 helped push gold prices to their highest levels this year. According to Bank of America analysts, gold may have overtaken the euro to become the world’s largest reserve asset after the US dollar.
Geopolitical risks, such as the conflict between Israel and Gaza and the conflict between Russia and Ukraine, as well as signals from the Federal Reserve about a possible interest rate cut in September amid a slowing labor market, also contributed to the rise in gold prices.
The only net seller in July: On the other hand, the Central Bank of Kazakhstan was the only net seller in July, as its gold reserves fell by 4 tons. Its total reserves reached 295 tons, or 55% of its total reserves, after a series of net purchases of more than 31 tons over 17 consecutive months.
Buy Gold: Investors should consider “buying gold” now, as the precious metal’s astonishing rally is expected to continue, according to Goldman Sachs analysts. In a research note issued on Tuesday, the analysts noted that gold futures were at around $2,515 per ounce. Although gold has retreated from its all-time high hit last month, it is still up nearly 22% year-to-date, making it the second-best performing asset globally after cryptocurrencies.
