Gold Reclaims Gains After Jobs Data

Gold prices climbed above $5,120 per ounce on Friday as weak February labor market data fueled concerns about an impending economic slowdown, causing investors to seek refuge in non-yielding assets despite lingering inflation pressures. The US economy saw the unemployment rate ticking up to 4.4%, above expectations for a 4.3% rise to underscore the deteriorating health of the domestic labor market after a surprise drop in non-farm payrolls. This poor performance prompted a rapid shift in sentiment, as traders now weigh the heightened risk of recession against the Federal Reserve's restrictive stance on interest rates amid inflation resurgence concerns. While inflationary fears tied to the Middle East conflict persist, the demand for gold as a hedge against systemic economic instability has effectively outweighed the headwinds from investors seeking US dollar liquidity.

Gold rose to around $5,110 per ounce on Friday, but remained on track for its its first weekly decline in five weeks, as a stronger US dollar and higher Treasury yields offset the geopolitical risk premium. While the ongoing Middle East conflict boosted demand for safe-haven assets, it also sent oil prices surging, raising inflation concerns and prompting traders to scale back bets on Federal Reserve rate cuts. Markets are now pricing in just one reduction this year, down from two earlier in the week. Recent US data also signaled strong economic momentum, with lower jobless claims, stronger productivity, fewer job cuts, and faster-than-expected services sector growth. Meanwhile, the US-Israeli conflict with Iran entered its seventh day, with Iran launching missiles and drones across the Gulf on Thursday, striking an oil refinery in Bahrain, while Israel continued airstrikes on Tehran and the US suspended operations at its embassy in Kuwait.

Gold erased early gains to trade slightly lower at around $5,115 per ounce on Thursday, as a stronger US dollar and reduced expectations for interest rate cuts by the Federal Reserve offset safe-haven demand linked to the escalating Middle East conflict. Tensions intensified after Tehran was hit by a large wave of strikes from Israel, targeting infrastructure reportedly linked to Iranian authorities, following earlier Iranian missile attacks that sent millions of Israelis into bomb shelters. Iranian officials also denied reports that their intelligence ministry had approached Washington for negotiations, dismissing the claims as false. At the same time, concerns over energy supply disruptions continued to push oil prices higher and fuel inflation worries, prompting traders to push back expectations for monetary easing. Markets now anticipate the first Fed rate cut in September, with two reductions still priced in for 2026.