Gold prices rose on Thursday, supported by softer than expected jobs data and lower oil prices, while the market’s focus turned to today’s U.S. payrolls report for fresh cues on the Federal Reserve’s trajectory.
Edgar Su | Reuters
Gold extended its gains, climbing more than 2% on Thursday, after weaker-than-expected U.S. non-farm payrolls data reduced expectations of Federal Reserve interest rate hikes this year.
Spot gold was up 2.2% at $4,117.63 per ounce. U.S. gold futures inched 1.2% higher to $4,130.10.
The U.S. dollar index was down 0.7%, making dollar-priced metals cheaper for holders of other currencies.
“The lower-than-expected jobs number portends to less likelihood of potential rate hikes later this year. As we know, gold has a tendency to perform better in lower interest rate environments,” said David Meger, director of metals trading at High Ridge Futures.
“Hence, we saw a significant rally in the gold market on the back of that,” he added.
A Labor Department report showed the U.S. economy added 57,000 jobs last month, compared with economists’ estimates for a rise of 110,000. The unemployment rate stood at 4.2%.
That followed a report on Wednesday showing that U.S. private payrolls increased less than expected in June.
Traders now see a nearly 51% chance of a rate hike by September, down from 66% before the data, according to the CME FedWatch tool.
On Wednesday, Fed Chairman Kevin Warsh said that inflation expectations and inflation risks have come down in recent weeks, even as he repeated that the Fed is committed to bringing inflation down to its 2% goal.
Meanwhile, the World Gold Council said that central banks were back in buying mode in May and, based on the latest reported data, official gold reserves increased by a net 41 tons during the month.
On the Middle East front, Iran and the United States concluded a round of indirect talks on Wednesday with no sign that they had made headway toward lasting peace.
