Inflation Pressures Ease, Gold Heads for Weekly Rally
Gold prices are heading for their first weekly gain since May, as market participants trim expectations for a Federal Reserve interest rate hike. Gold rose near US$4,200 per ounce and has gained around 2.3% so far this week.
At 1:32 p.m. London time, spot gold was up 1.3% at US$4,174.75 per ounce. Silver gained 2% to US$62.05 per ounce, while platinum and palladium also rose.
Gold's gains were driven by weaker US jobs data and falling energy prices. Data released Thursday showed US hiring slowed sharply in June, signaling that the labor market remains challenging despite previously appearing strong.
The market now rates less than 20% chance of a 25 basis point interest rate hike at the next Fed meeting. This is down from around a third at the start of the week. Expectations of lower interest rates are positive for gold, as the precious metal does not yield a yield.
On the other hand, oil prices also weakened sharply after tanker flows through the Strait of Hormuz began to recover. Saudi Arabia and the United Arab Emirates are said to have resumed oil shipments from the Persian Gulf, approaching pre-war levels, helping to ease concerns about energy-driven inflation.
TD Securities analyst Bart Melek believes that lower energy prices and weaker job growth could ease inflationary pressures in the coming months. He predicts that gold has the potential to strengthen towards resistance at US$4,280 per ounce, although the US$5,300 target is not expected to be reached until next year as inflationary pressures have not completely dissipated.
Meanwhile, President Donald Trump and his allies' push to reshape the Federal Reserve has again raised concerns about the independence of the
