Gold prices experienced a significant rally this week, with spot gold climbing 2.5% to $4,345.47 an ounce on Friday and extending its weekly gain to over 7%, marking the largest weekly increase in more than six months. The surge was primarily driven by an unexpected contraction in US employers cutting 23,000 jobs in July, coupled with downward revisions for May and June, which suggested a weaker labor market than previously thought. This soft jobs data alleviated concerns that the Federal Reserve would imminently raise interest rates, making non-yielding assets like gold more attractive.
Adding to gold's momentum were comments from US Federal Reserve Chairman Kevin Warsh on Wednesday, who stated that inflation expectations and risks have decreased, further dampening speculation of immediate rate hikes. These remarks, made at the European Central Bank forum in Portugal, helped gold snap a two-day losing streak and closed up 0.6% around $4,050 an ounce. A Bloomberg gauge of the dollar also slumped by as much as 0.5% after the jobs report, providing an additional boost to commodities priced in the currency.
The rally pushed gold prices as high as $4,371.93 an ounce, the highest level since mid-June, before paring some gains. Analysts like Justin Lin from Global X ETFs noted that the initial move appeared to be a technical breakout, with some momentum from Iran negotiations and doubts about Fed hawkishness. However, he emphasized that the current rally is more about buyers reasserting control rather than a direct reaction to Middle East talks. Gold-backed exchange-traded funds in China also saw continued inflows, reflecting institutional investor confidence in current prices as an attractive entry point.
Despite an earlier slump that sent gold into a bear market in June, dip-buyers have emerged with growing force. The metal has fallen by nearly a fifth since the US-Iran war began in late February, which had sent energy prices soaring and stoked inflationary pressures. However, the recent developments have shifted market sentiment, allowing gold to hold above the key $4,000-an-ounce level.
