Gold futures rebounded on Friday (Aug. 4) following a series of losses, supported by a weakening dollar and a decline in US government bond yields, which came after disappointing US employment numbers. This unexpected slowdown in job growth is likely to impact the Federal Reserve’s (Fed) interest rate hike plans.
The gold futures market saw a notable uptick of $7.30, equivalent to 0.4%, settling at $1,976.10 per ounce. However, the metal still recorded a weekly decline of 1.2%.
Other precious metals also experienced gains on Friday. Silver futures rose by 2 cents, closing at $23.72 per ounce. Platinum futures surged $6.70, or 0.7%, to end at $928.50 per ounce, while palladium futures climbed $7.20, or 0.6%, reaching $1,264.60 per ounce.
The strengthening of gold futures can be attributed to the decline in the dollar index against a basket of six major currencies, dropping by 0.52% to 102.0145 on Friday. A weaker dollar typically increases the allure of gold as it becomes more affordable for holders of other currencies. Furthermore, the decrease in US Treasury yields provided additional support to the precious metal’s prices.
Gold’s appeal as a safe-haven asset rises when the dollar weakens. Moreover, lower US government bond yields make holding gold a more attractive proposition since the precious metal doesn’t offer any interest, making it more competitive relative to interest-bearing assets.
The decline in the dollar and US Treasury yields was triggered by the release of disappointing US employment data. The Labor Department reported that nonfarm payrolls only increased by 187,000 in July, falling short of analysts’ expectations, and pushing the unemployment rate down to 3.5% from the predicted 3.6%.
However, there was a silver lining in the data, as workers’ average hourly wages rose by 4.4% year on year in July, surpassing analysts’ forecasts of 4.2%. Additionally, average hourly wages rose by 0.4% month on month, higher than the anticipated 0.3%.
These hourly wage figures are crucial for the Federal Reserve (Fed) as they closely monitor them for signs of inflationary pressures in the economy. The stronger-than-expected wage growth could influence the Fed’s decision-making process in relation to their monetary policy and interest rate adjustments.
In conclusion, gold prices rebounded significantly on Friday, bolstered by a weak dollar and declining US Treasury yields. The unexpected slowdown in US job growth is likely to impact the Fed’s plans for interest rate hikes. As investors seek refuge in safe-haven assets like gold, the precious metal’s rally is expected to garner attention in the coming days, particularly in light of the Fed’s responses to the current economic landscape.
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Saturday, August 5, 2023