Gold climbs over 1% as weak US jobs data dims Fed rate hike expectations

Gold prices rose more than 1% on Friday, putting the precious metal on track for its first weekly gain in five weeks after weaker-than-expected US employment data reduced expectations of a near-term Federal Reserve interest rate hike.

Spot gold climbed 1.28% to $4,175.37 per ounce after touching its highest level since June 23.

US gold futures for August delivery advanced 1.49% to $4,187.30 an ounce.

Gold has gained more than 2% this week after four consecutive weekly declines.

The rally came after the latest US labor market report showed a significant slowdown in hiring, prompting investors to reassess the outlook for US monetary policy while weighing persistent inflation pressures and ongoing central bank demand for bullion.

Weak jobs data boosts gold

Investor sentiment shifted after US nonfarm payrolls increased by just 57,000 in June, well below economists' expectations of 110,000.

The unemployment rate edged lower, although the decline was largely attributed to a fall in labor force participation, which dropped to 61.5%, its lowest level since March 2021.

The weaker labor market data led investors to scale back expectations for additional Federal Reserve tightening.

According to the CME FedWatch Tool, traders now see about a 54% chance of a September rate hike, down from 66% before the employment report.

The softer outlook for interest rates weighed on the US dollar, with the US Dollar Index (DXY) on track for its biggest weekly decline since April.

A weaker dollar typically makes gold more affordable for buyers using other currencies.

Lower interest rates also reduce the opportunity cost of holding non-yielding assets such as gold, further supporting prices.

Federal Reserve Chair Kevin Warsh did not provide forward guidance on future policy but reiterated the central bank's commitment to controlling inflation.

Central bank buying remains supportive

Beyond monetary policy, central bank demand continued to provide longer-term support for gold prices.

The World Gold Council reported that central banks added a net 41 metric tons of gold to official reserves in May, indicating renewed buying after recent fluctuations.

Physical demand showed mixed trends across major markets. Buying interest in India weakened as higher prices discouraged purchases, while demand in China improved modestly during the week.

Investors are also preparing for several key US economic releases in the coming days, including the Federal Open Market Committee meeting minutes, the ISM Services PMI, weekly initial jobless claims and the July 14 inflation report, all of which could influence expectations for future Fed policy.

Technical outlook remains mixed

Despite posting its third consecutive daily gain, gold's broader technical picture remains cautious.

Momentum has improved in the short term, with the Relative Strength Index signaling strengthening buying interest.

The next upside target is the psychological $4,200 level. Above that, resistance is seen around $4,225 to $4,250, followed by $4,300 and the 200-day simple moving average near $4,483.

On the downside, a move below $4,100 could expose support at $4,050 and the key $4,000 level.

A break below $4,000 would leave the yearly low of $3,941 as the next major support.

Other precious metals also advanced on Friday.

Spot silver rose 1.9% to $62.19 per ounce, platinum gained 2.3% to $1,653.30, and palladium added 0.8% to $1,278.36. All three metals were also on track to post weekly gains.