Spot gold prices have risen sharply as weak US employment figures have alleviated market worries about potential interest rate hikes by the Federal Reserve this year to combat inflation.
Following the release of the June non-farm payrolls report, spot gold surged by as much as 2.8%, extending its rebound from the previous two trading sessions. The data revealed a significant slowdown in US job creation for June, with the reported figure coming in below the forecasts of nearly all economists surveyed.
The weak employment data is expected to reduce pressure on Federal Reserve officials to raise interest rates in July. Recent remarks by the Fed Chair at a European Central Bank forum were interpreted by markets as less hawkish than previously feared. Since gold does not yield interest, higher borrowing costs typically exert downward pressure on its price.
An ING Bank commodity strategist commented, "The weaker-than-expected jobs report has refocused the market on the prospect of Fed rate cuts, pushing down US Treasury yields and the US dollar, which in turn has provided fresh upward momentum for gold."
The strategist added that the future direction of gold will depend on whether upcoming economic data continues to support expectations for monetary easing.
As of 3:25 p.m. London time, spot gold was up 2.3% at $4,122.02 per ounce. Spot silver rose 3.7% to $61.31 per ounce.
Platinum and palladium prices also moved higher in tandem.
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