Gold Prices Increase on Weaker U.S. Economic Data
Gold prices drifted higher on Thursday after softer-than-expected U.S. economic data fuelled hopes that the Federal Reserve could cut interest rates as soon as September. Spot gold was up 0.3% at $2,362.10 per ounce, as of 0200 GMT after hitting a near two-week high in the previous session. U.S. gold futures were little changed at $2,369.80.
U.S. Labor Market Gradually Slowing
The U.S. labor market is gradually slowing, as indicated by weaker economic data released on Wednesday. Reports on services and ADP employment showed a slowing economy, with an increase in initial applications for U.S. unemployment benefits last week. Traders are now eagerly awaiting the U.S. nonfarm payrolls (NFP) data, which is due on Friday.
Gold Could Reach $2,400 if NFP Confirms Economic Weakness
Analysts believe that if the NFP report confirms the economic cracks seen in other data, gold prices could hit $2,400. Matt Simpson, a senior analyst at City Index, stated that the recent softer-than-expected ISM services report was favorable for Fed doves. He also suggested that traders are likely to buy dips on gold amid uncertainties in the U.S. dollar index.
Fed’s Potential Interest Rate Cut Impacting Gold Prices
The U.S. dollar weakening against other currencies has made greenback-priced bullion cheaper for investors. Market expectations of a 74% chance of the Fed cutting interest rates at its September meeting have escalated, leading to a reduction in the opportunity cost of holding non-yielding gold.
Fed’s Outlook on the Economy
During their last meeting, Fed officials acknowledged the slowdown in the U.S. economy but opted for a wait-and-see approach before deciding on rate cuts, as per minutes from the June 11-12 session.
Other Precious Metals Performance
While spot silver rose 0.2% to $30.54 and platinum added 0.5% at $1,002.28, palladium fell 0.6% to $1,023.23 after reaching its highest level since mid-April in the previous session.
(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich and Sonia Cheema)
Insight: The analysis suggests that gold prices are highly influenced by economic data and monetary policy decisions, indicating the importance of staying informed about market indicators and central bank actions when investing in precious metals.
