Gold prices held steady on Friday, poised for their first weekly gain in three weeks as traders ramped up bets that the U.S. Federal Reserve will soon start cutting interest rates. This anticipation has sent the dollar and Treasury yields lower, making gold more attractive to investors.
As of 0321 GMT, spot gold was stable at $2,377.13 per ounce, having gained about 2% so far this week. U.S. gold futures also edged up 0.2% to $2,396.00 per ounce.
The dollar hovered near an eight-week low, while the benchmark 10-year U.S. Treasury yield fell to 4.275% on Thursday, its lowest since April 1. These factors have created a supportive environment for the precious metal, according to IG market strategist Yeap Jun Rong. “Gold prices have been holding up lately, as declining bond yields and a struggling U.S. dollar have offered a supportive environment for the yellow metal,” Jun Rong noted.
Markets are now eyeing the U.S. non-farm payrolls data, set to be released at 1230 GMT, which could significantly impact gold prices. Economists have forecasted a median job growth of 185,000. “It may have to take a significant downside surprise in labor conditions to convince the Fed for an earlier rate cut, given that inflation progress has broadly stalled around the 3% level. Any weaker labor market data could translate to upside in gold prices,” Jun Rong added.
Recent macroeconomic data have pointed to cooling inflation, fueling expectations that the Fed might start cutting rates as early as September. Lower interest rates generally reduce the opportunity cost of holding non-yielding bullion, making gold a more attractive investment.
Despite a dip in physical demand, gold prices are expected to hit another record high this year. Consultancy Metals Focus predicts that a mix of factors, including U.S. rate cut expectations, central bank buying, and geopolitical tensions, will drive demand. This surge in demand propelled gold to a record high of $2,449.89 on May 20.
In other precious metals, spot silver fell 0.4% to $31.16 per ounce, platinum rose 0.3% to $1,006.15, and palladium dropped 0.4% to $925.75.
As the market awaits the non-farm payrolls data, the interplay of economic indicators and Federal Reserve policies continues to shape the outlook for gold and other precious metals.