Gold rose more than 1% on Friday and was on track for its first weekly gain in five weeks, as weaker-than-expected US employment data pushed traders to scale back expectations of further Federal Reserve rate hikes.
Spot gold was up 1.4% at $4,179.42 per ounce at 0744 GMT, after briefly touching its highest level since June 23. US gold futures for August delivery climbed 1.6% to $4,191.90.
The rally came after US labour market figures showed nonfarm payrolls increased by just 57,000 jobs in June, significantly below the 110,000 forecast in a Reuters poll. Private payrolls also came in softer than expected.
The data has reinforced expectations that the Federal Reserve may not need to tighten policy further in the near term. Traders are now pricing in a 54% chance of a rate hike in September, down from 66% before the release, according to CME FedWatch.
Lower rate expectations tend to support gold, which does not yield interest, as it becomes more attractive compared with interest-bearing assets.
“What we’re seeing is a reduction in the pricing of Federal Reserve interest rate hikes for the rest of this year, as well as Q1 next year, and that has been primarily driven by a rather lacklustre labour market data yesterday,” said Kelvin Wong, senior market analyst at OANDA.
The US dollar was also headed for a weekly decline, making bullion cheaper for holders of other currencies and adding further support to prices.
Despite the recent rally, analysts noted that rate expectations have not fully reversed, and gold could still face pressure later in the year if economic conditions stabilise. Some forecasts still see prices easing towards $3,500 per ounce.
Separately, the World Gold Council said central banks returned to buying gold in May, with official reserves rising by a net 41 tonnes during the month.
Other precious metals also moved higher, with silver up 2.9% at $62.80 per ounce, platinum gaining 2.8% at $1,661.61 and palladium rising 1.1% at $1,281.42. All three were set for weekly gains.
