The recent economic data has sent gold prices on the rise, with investors betting on a potential interest rate cut from the Federal Reserve. This week, spot gold gained 0.2% reaching $2,350.87 per ounce, hitting a more than two-week high. The increase in prices this week has marked a 2.2% rise so far. U.S. gold futures also saw a rise of 0.7% to $2,356.90. The surge in gold prices can be attributed to the negative impact of recent U.S. macro data, particularly the increase in new claims for unemployment benefits last week.
According to Tim Waterer, chief market analyst at KCM Trade, the recent jobless claims figures, in addition to the weaker nonfarm payrolls data, suggest that the jobs market in the U.S. may be showing signs of slowing down. This has led traders to predict that the Federal Reserve will kickstart an easing cycle in September. Lower interest rates are favorable for gold investors as it reduces the opportunity cost of holding the precious metal. Waterer also points out that inflation reports will play a crucial role in determining the timing of rate cuts. If inflation remains low, gold could potentially benefit from the situation.
Amidst the speculation about rate cuts, there is considerable uncertainty regarding the direction of U.S. inflation in the coming months. San Francisco Fed President Mary Daly highlighted this uncertainty, emphasizing the need to closely monitor inflation trends. The upcoming U.S. producer price index and consumer price index data will provide further insights into the inflation landscape and may influence future decisions by the Federal Reserve.
In addition to domestic factors, global developments are also impacting gold prices. The recent round of indirect negotiations in Cairo to cease hostilities in Gaza has come to an end, leading to potential geopolitical tensions. These external factors could contribute to market volatility and influence investor sentiment towards safe-haven assets like gold.
Apart from gold, other precious metals have also seen positive movements. Spot silver was up 0.2% reaching $28.38 per ounce, marking its best week since April 5. Platinum and palladium also experienced gains, with platinum rising by 0.6% to $983.78 and palladium increasing by 0.5% to $971.50. Both metals are set for weekly gains, reflecting the overall optimism in the precious metals market.
The outlook for gold remains positive as investors anticipate a potential rate cut from the Federal Reserve amidst economic uncertainties and global geopolitical developments. The upcoming inflation data will be closely watched to gauge the future trajectory of gold prices.