Gold Prices Climb as Dollar Weakens Ahead of Payroll Data

Gold prices experienced an upward trend during Asian trading on Friday, continuing their recent gains as the dollar weakened ahead of important nonfarm payroll data, which may influence interest rate decisions.

The yellow metal has gained this week following a series of disappointing U.S. economic reports that have increased expectations for a potential Federal Reserve interest rate cut by September. As of 01:05 ET (05:05 GMT), gold rose by 0.3% to $2,363.61 an ounce, while August futures also jumped 0.3% to $2,371.56 an ounce.

Spot gold prices are poised to increase by 1.6% for the week and are now approximately $100 below an all-time high, driven by heightened speculation regarding a September rate cut. Weak employment data and sluggish business activity have weighed on the dollar.

Traders are currently pricing in over a 66% likelihood that the Federal Reserve will implement a 25 basis point rate cut in September. However, recent hints from the Fed have tempered some of the optimism surrounding rate cuts; the minutes from their June meeting showed a cautious approach among policymakers regarding rate reductions.

The upcoming payroll data is expected to provide clearer insights into the labor market, a critical consideration for the Fed when deciding on interest rate adjustments. Lower interest rates typically enhance gold and other precious metals’ appeal by making them comparatively more attractive than other investments like debt or the dollar.

In other precious metals, prices also increased, and many are on track for weekly gains. Silver rose 0.2% on Friday, reflecting a modest weekly increase, while platinum significantly outperformed other precious metals, showing gains of over 4% this week.

In the industrial metals sector, copper prices climbed on Friday, signaling a positive finish to the first week of July after experiencing significant losses in June. The benchmark copper price on the London Metal Exchange increased by 0.3% to $9,913.50 per tonne, while one-month futures rose 0.3% to $4.5777 per pound. Both contracts have seen increases of 3% to 4% this week, recovering some of the prior month’s losses.

Despite this rebound, market sentiment towards copper remains cautious, primarily due to uncertainties regarding economic recovery in China, the top importer of copper. On top of that, new European trade tariffs on China’s electric vehicle exports came into effect on Friday, with Beijing hinting at possible retaliation, raising concerns about escalating trade tensions with the West.