Dollar and Yields Plunge; Gold Soars 4%
Gold prices surged sharply during Wednesday's trading (Aug 5), recording their largest daily gain since February. According to the latest market update, spot gold rose 4.4% to US$4,253.36 per troy ounce after briefly touching US$4,264.93—its highest level since June 18. U.S. gold futures for December delivery closed 3.7% higher at US$4,305.20.
The gold rally was driven by the U.S. dollar weakening to near six-week lows and the 10-year Treasury yield dropping to a one-week low. A weaker dollar boosts the purchasing power of non-U.S. investors, while lower yields reduce the opportunity cost of holding non-interest-bearing gold.
Sentiment strengthened further after ADP data showed U.S. private companies added only 44,000 jobs in July, a sharp slowdown from 95,000 in June. These results reinforced indications that hiring momentum is cooling, leading the market to scale back expectations for Federal Reserve interest rate hikes.
However, hawkish pressure has not entirely vanished. Kansas City Fed President Jeff Schmid assessed that current policy is not yet restrictive enough to bring inflation down to the 2% target. Fed Governor Lisa Cook also stated she is prepared to support rate hikes if inflation does not soon moderate.
On the geopolitical front, progress in talks between Iran and Oman regarding the Strait of Hormuz shipping lanes helped push down oil prices and ease concerns over energy-driven inflation. However, no final agreement has been reached, as issues regarding vessel control, inspections, and transit fees remain unresolved. This means gold is finding support from easing inflation but still faces risks should yields rise again or the Hormuz negotiations fail.
Newsmaker Analysis: Gold's momentum remains bullish after breaking through the US$4,200 level and the 50-day moving average around US$4,160. The nearest resistance level is at US$4,265, followed by the psychological level of US$4,300. A breakout above US$4,300 could pave the way for a move toward the US$4,330–US$4,350 range. Conversely, profit-taking could drive the price to test the US$4,200 level, followed by US$4,160. The next key focus is the Non-Farm Payrolls (NFP) report; weak labor data could extend the rally, whereas strong NFP figures and high wage growth might reignite expectations of interest rate hikes. (arl)
Source: Newsmaker.id
