Spot gold climbs to $4,388 as soft US payrolls data cools Fed rate hike expectations
Precious metals advanced as a weaker dollar and disappointing US employment figures diminished expectations for a Federal Reserve interest rate increase next month, signaling a shift in market sentiment toward non-yielding assets.
Spot gold advanced 0.3% to $4,388.62 per ounce by 0028 GMT, while December U.S. gold futures added 0.2% to reach $4,444.30. The rally was accompanied by a broader uplift in precious metals, with spot silver gaining 0.8% to $65.19 per ounce.
This upward momentum is largely driven by a 0.1% decline in the U.S. dollar index, which reduces the cost of greenback-priced metals for international buyers. The currency weakness follows an unexpected decline in U.S. nonfarm payrolls for July.
Further cooling the outlook for tighter monetary policy, data released last week indicated only mild consumer price inflation. Consequently, investors are recalibrating their expectations for the Federal Reserve's actions next month.
According to the CME FedWatch Tool, markets are now pricing in just a 33% probability of a September interest rate hike. This represents a significant drop from the 47% chance assigned by traders a month ago.
For investors, the shifting rate trajectory alters the relative attractiveness of non-yielding assets like bullion. When expectations for higher borrowing costs diminish, the opportunity cost of holding precious metals typically decreases.
However, the surge in global prices is stifling physical demand in major consumer markets. In India, gold discounts widened to their highest levels in over two months last week as the price rally deterred local consumption.
Similarly, physical interest in China remains muted despite ongoing accumulation by the central bank. This divergence between paper market rallies and subdued physical retail demand presents a mixed picture for overall consumption.
The broader complex also benefited from the macroeconomic backdrop, with platinum rising 0.4% to $1,755.40 and palladium adding 1.2% to $1,329.00. Market participants are now looking ahead to a fresh round of Asian economic data to gauge global demand.
Traders will closely monitor upcoming Chinese figures on urban investment, retail sales, and urban unemployment for July. Japanese tertiary industry activity data will also provide further clues on regional economic health.
