Weak NFP Fuels Gold Rally
Gold prices rose sharply on Thursday (July 2nd) after US employment data came out much weaker than expected. This condition eased concerns that the Federal Reserve would soon raise interest rates to curb inflation.
Spot gold rose around 2.2% to US$4,116.54 per ounce. Meanwhile, US gold futures closed up 1.1% to US$4,125.70 per ounce. In intraday trading, gold even jumped as much as 2.8%.
The main catalyst came from the US Nonfarm Payrolls report. The US economy added only 57,000 jobs in June, far below market expectations of 110,000. This data indicates that labor market momentum is starting to slow more sharply than previously estimated.
The report eased pressure on Fed Chairman Kevin Warsh to raise interest rates anytime soon. Previously, the market had worried that the Fed would raise interest rates again this year because inflation remained above its 2% target.
Warsh's comments at the European Central Bank forum in Sintra were also deemed less hawkish than the market had feared. He did affirm the Fed's commitment to bringing inflation back to its 2% target, but also noted that inflation risks had declined in recent weeks.
The US dollar also weakened after the employment data was released. The dollar index fell by around 0.5%, making gold cheaper for foreign buyers. The decline in Treasury yields also helped gold by lowering the opportunity cost of holding non-yielding assets.
In other metals markets, silver rose 2.6% to US$60.69 per ounce. Platinum strengthened 2.6% to US$1,617 per ounce, while palladium jumped 4.7% to US$1,267.14 per ounce. These increases indicate that positive sentiment is not limited to gold but is also spreading to other precious metals.
However, the upside potential for gold remains to be confirmed. As long as US inflation remains high, the Fed is still likely to maintain a tight stance. The market is currently lowering expectations for interest rate hikes, but has not completely dismissed the possibility of tightening by the end of the year.
Technically, the US$4,100 area is a key level for gold. If the price can hold above this level, there is a chance for further gains to US$4,150 to US$4,180. However, if the US dollar strengthens again or Fed officials become hawkish again, gold risks a correction to the US$4,050 to US$4,000 area.
Overall, today's gold surge was driven by a combination of weak NFP data, a weakening dollar, and easing Fed interest rate expectations. The market's next focus will be on comments from Fed officials, US inflation data, and US-Iran geopolitical developments. (arl)
Source: Newsmaker.id
