Gold prices strengthened again in Thursday’s trading, reaching their highest level in over two weeks. Spot gold rose 1% to US$4,100.27 per ounce, having touched US$4.146,63—its highest point since October 20. This gain follows a surge of nearly 3.4% in the previous session.
The rise in gold was supported by a weakening US dollar and lower Treasury yields. The dollar index hovered near its lowest level since September 30, while the yield on the 10-year US Treasury note fell to its lowest point in nearly two months. These conditions have made gold more attractive, as the opportunity cost of holding a non-yielding asset has decreased.
Oil prices remaining below US$100 per barrel also provided additional support. Brent crude had previously plummeted nearly 9% as the market perceived a reduced likelihood of an escalation in the conflict involving Iran. Lower energy prices could potentially ease inflationary pressures and reduce the need for the Federal Reserve to maintain high interest rates for an extended period.
Nevertheless, expectations for a Federal Reserve interest rate hike have not entirely vanished. According to the CME FedWatch tool, the market still sees a roughly 66% probability of a rate hike in December. Higher interest rates generally exert pressure on gold by increasing the opportunity cost of holding an asset that does not generate a yield.
Investor attention has now shifted to the US Nonfarm Payrolls (NFP) report, due for release on Friday. This data is critical, as it may offer fresh insights into the state of the labor market and the future direction of the Federal Reserve’s monetary policy. Labor market data that comes in stronger than expected could bolster expectations for a rate hike and weigh on gold.
Conversely, if the NFP report indicates a weakening labor market, expectations for a more accommodative monetary policy could resurface. These conditions could potentially provide room for gold to maintain its upward momentum, especially if the dollar and Treasury yields weaken further.
Newsmaker Analysis: Gold is currently supported by a combination of a weaker dollar, declining Treasury yields, and easing pressure on energy prices. However, the Non-Farm Payrolls (NFP) report serves as the next key catalyst. Strong data could exert pressure on gold, while weak data might extend the rally.
Source: Newsmaker.id