Gold prices firmed on Thursday, buoyed by a weakening US dollar and declining Treasury yields amid rising speculation that US interest rate cuts could begin as early as September. Investors are now turning their attention to the upcoming US non-farm payrolls (NFP) data for further economic signals.
Spot gold climbed 0.8% to $2,373.31 per ounce as of 02:58 GMT, following a 1% increase in the previous session. Meanwhile, US gold futures rose 0.7% to $2,392.80 per ounce.
The dollar index fell 0.2%, hovering around a near two-month low, while benchmark US 10-year Treasury yields lingered near their weakest levels in over two months. These movements in the currency and bond markets have provided a supportive environment for gold prices.
“Buyers were giving the US dollar the cold shoulder today following the weak ADP in the lead up to the non-farm payrolls data (NFP) which enabled the gold price to prosper,” said Tim Waterer, chief market analyst at KCM Trade. “The fundamental outlook still looks constructive for gold as we move closer towards possible Fed rate cuts in the second half of the year. Though the $2,300 level could come into question on the downside if we get a particularly strong NFP figure.”
Recent data from the ADP National Employment Report showed that hiring by US private employers dropped to a four-month low in May, adding to signs that the job market is cooling. This has fueled market speculation that the Federal Reserve might cut its key interest rate sooner rather than later. Investors are eagerly awaiting the NFP data, due on Friday, for more insights into the state of the job market and its potential impact on monetary policy.
A Reuters poll indicates that a majority of forecasters expect the Federal Reserve to reduce its key interest rate in September, with another cut likely by the end of the year. However, there remains a significant risk that the Fed might opt for only one rate cut or none at all.
Lower interest rates are generally favorable for gold as they reduce the opportunity cost of holding non-yielding assets like bullion.
In addition to gold, other precious metals saw gains. Spot silver rose 1.8% to $30.54 per ounce, platinum increased by 1.2% to $1,003.95, and palladium also gained 1.2%, reaching $942.75.
As markets brace for the NFP data, the outlook for gold remains positive, driven by the potential for lower interest rates and a cooling job market. However, a stronger-than-expected NFP report could challenge this bullish sentiment and test the resilience of gold prices.
