Gold steadied after achieving its first weekly advance since May, with prices around $4,195 an ounce, supported by a decrease in the likelihood of the US Federal Reserve raising interest rates. This positive movement followed weak US jobs data for June, which suggested a cooling labor market and reduced the chances of aggressive rate hikes, leading to gold rising as much as 1.8% after a 2.3% gain in the previous session.
Despite the weekly gain, gold prices saw a slight retreat on Monday, with spot gold falling 0.6% to $4,151.66 an ounce and gold futures dropping 0.7% to $4,167.29/oz. This minor setback occurred as the dollar recovered some of its losses from the previous week. The prospect of higher interest rates typically negatively impacts gold, as it increases the opportunity cost compared to interest-bearing assets like government debt. Gold had been significantly weighed down by these expectations earlier in the year, moving away from its record highs in January.
Investors are closely watching the upcoming minutes from the Fed's June meeting for more insights into the future path of interest rates. Although Fed policymakers had previously indicated that persistent inflation might necessitate at least one rate hike this year, recent data, including a sharp slowdown in US hiring in June, has shifted expectations. Futures markets now price the probability of a quarter-point hike in the next Fed meeting at less than 20%, down from a third earlier in the week. This reduction in hike expectations prompted traders to cover short positions and reduced the incentive to liquidate long positions, contributing to gold's recent rally. The Bloomberg Spot Index, which measures the US dollar, was largely flat, but the dollar had recovered slightly from its near two-week low.
