Gold Steadies After Weekly Gain as Rate-Hike Worries Recede

Gold prices held steady after posting their first weekly gain since May, as concerns over potential interest rate hikes by the US Federal Reserve (Fed) receded. Global markets saw increased interest in precious metals following macroeconomic data that suggested the Fed might adopt a softer stance on its monetary policy.

This development was primarily driven by the weaker-than-expected US nonfarm payrolls report for June. Data from the US Department of Labor indicated that nonfarm employment increased by only 57,000 jobs in June, significantly below economists' expectations of 110,000. This marked the slowest pace of hiring in four months. The unemployment rate also ticked up to 4.2%, signaling a cooling in the labor market. Following the subdued jobs report, the probability of a September Fed rate hike dropped to approximately 54% from 66%, according to the CME FedWatch Tool.

The easing of monetary tightening expectations boosted the appeal of gold, a non-yielding asset. Spot gold (XAU/USD) climbed 1.4% on Friday to $4,179.94 per ounce, achieving a weekly gain of around 2.3%. This rally helped gold recover from its seven-month lows observed in late June. Furthermore, a weaker US dollar against other major currencies and a decline in US Treasury yields provided additional support for gold prices.

This macroeconomic backdrop aligns with broader expectations of a global economic slowdown and a moderation in inflationary pressures. While geopolitical tensions, such as the US-Iran conflict, have historically influenced gold prices, recent declines in oil prices have also somewhat alleviated inflation concerns. Additionally, the World Gold Council reported that central banks increased their net gold reserves by 41 metric tons in May, indicating sustained global demand for the yellow metal.

Market analysts hold diverse views on gold's future trajectory. Kelvin Wong, a senior market analyst at OANDA, cautioned that rate hike expectations have not entirely disappeared, suggesting that if these expectations persist through year-end, gold could face renewed downside pressure, potentially falling towards $3,500 per ounce. Conversely, analysts at UBS anticipate gold prices could surge to $5,200 per ounce in the coming year, arguing that markets are overestimating the Fed's hawkishness. Goldman Sachs projects gold to reach $4,900 per ounce by the end of 2026, while J.P. Morgan Global Research forecasts an average of $6,000 per ounce by Q4 2026 and $6,300 per ounce by the end of 2027. These projections underscore gold's potential to enhance portfolio resilience in the medium to long term.