Gold Dips as Dollar Firms

Gold fell to $4,140 an ounce on Monday, retreating from two-week highs due to a stronger US dollar. However, losses were limited as signs of a cooling US labor market reduced expectations of a Federal Reserve rate hike. Last week’s data revealed a significant slowdown in US job growth in June, along with downward revisions for the previous two months, prompting markets to dial back near-term rate hike bets. Meanwhile, oil prices edged lower as recovering energy flows through the Strait of Hormuz and the prospect of increased OPEC+ supply raised concerns about a potential glut. Investors now await the Fed’s meeting minutes, due Wednesday, with markets pricing in over a 50% chance of a September rate hike. JPMorgan noted in a Friday report that demand from key sectors may not be as strong as previously expected, capping gold’s rise to $4,300 an ounce in Q3 and $4,500 in Q4.

Gold traded above $4,100 an ounce on Monday, holding onto most of last week’s gains as weaker-than-expected US jobs data and lower oil prices led traders to scale back expectations for Federal Reserve interest rate hikes. Oil prices edged lower as recovering energy flows through the Strait of Hormuz and the prospect of increased OPEC+ supply fueled concerns about a potential glut. That has helped ease inflationary pressures that had previously heightened fears of further rate hikes and weighed on non-yielding gold. Meanwhile, data released last week showed US nonfarm payrolls increased by just 57,000 in June, the smallest gain in four months and well below forecasts of 110,000, prompting traders to reduce their bets on a September rate hike. According to the CME FedWatch tool, the probability of a hike fell to 50%, down from 66% before the report.

Gold climbed to $4,170 per ounce on Friday, touching its highest level since June 23 and reporting a 2% weekly gain after 4 consecutive weeks of declines, as weak US jobs data reduced expectations for a near-term Federal Reserve interest rate hike. US nonfarm payrolls increased by just 57,000 in June, the smallest rise in four months and far below the 110,000 forecast, prompting traders to lower their bets on a September rate hike. According to the CME FedWatch tool, the probability of a hike dropped to 50%, down from 66% before the report. Lower interest rates decrease the opportunity cost of holding non-yielding assets like gold. Additionally, the US dollar was on track for its largest weekly decline since April, further supporting gold prices. Central banks also contributed to demand, adding a net 41 metric tons of gold to reserves in May, per World Gold Council data. In physical markets, Indian demand softened as prices rose, while Chinese buying interest saw a slight improvement.