Gold prices pushed higher during the U.S. holiday-shortened week, ultimately breaking above the $4,100 per ounce mark and reaching a weekly high of $4,143.60. This rally was primarily driven by softer labor market data, less aggressive commentary from the Federal Reserve, and a weaker U.S. dollar, helping the precious metal rebound from a prior dip below $4,000 per ounce. Spot gold was trading near $4,120 per ounce heading into the Independence Day market closure, marking its strongest weekly gain since late May.
The catalyst for this surge was Thursday's jobs report, which revealed that nonfarm payrolls increased by a mere 57,000 in June, significantly below the market's expectation of 114,000. Additionally, the Bureau of Labor Statistics revised down April and May payroll gains by a combined 74,000 jobs, effectively wiping out the June gains. This weak jobs data eased pressure from Treasury yields, pushed the dollar lower, and severely dampened expectations for an imminent interest rate hike from the Federal Reserve. Market-implied odds of a September rate hike fell from about two-thirds to around 50% after the report, and CME Group Inc.’s FedWatch tool showed September hike odds dropping to approximately 60% from 75% before the payrolls data.
Analysts are largely bullish on gold following these developments. The latest Kitco News Weekly Gold Survey showed that 11 out of 16 analysts, or 69%, expected gold prices to gain ground in the coming week, with only two predicting a decline. David Meger, director of metals trading at High Ridge Futures, noted that the lower-than-expected jobs number weakened the case for more rate hikes, and gold tends to perform better in lower interest rate environments. Beyond the jobs data, other factors supporting gold included a decline in oil prices, which eased inflation concerns, and continued strong central bank buying, with an additional 41 tonnes added to reserves in May, valued at approximately $5.4 billion.
