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Gold futures finished lower Friday, reversing earlier gains, part of a general selloff of risk assets after a weak U.S. jobs report sparked worries that the Federal Reserve’s wait in current interest rates may cause a real economic slowdown.
Prices briefly rose early as the weak U.S. jobs data signaled looser interest policy likely is in store from the Fed, but that momentum was overwhelmed by the stock market rout.
The U.S. added 114K non-farm jobs in July, much less than expected, the unemployment rate rose to 4.3% from 4.1%, and average hourly earnings growth fell, all signs of a likely rate cut from the Fed next month.
While the malaise weighed on gold Friday, analysts said a more dovish Fed approach eventually should boost gold.
The risk-off flight from equities will provide a net drag on gold in the short term, but “this is the first large weak job report in a year… if it turns out to be a trend, it implies multiple Fed cuts this year… a green light for new all-time highs in gold,” MKS PAM head of metals strategy Nicky Shiels told Bloomberg.
Front-month Comex gold (XAUUSD:CUR) for August delivery finished -0.4% on Friday to $2,425.70/oz, off 1.5% from its 2024 settlement high of $2,462.40/oz hit July 16; the December contract traded as high as $2,522.50/oz, the highest intraday price ever for a most-active contract, before settling -0.4% at $2,469.80/oz.
Front-month August Comex silver (XAGUSD:CUR) ended Friday -0.3% to $28.246/oz, 12.3% below its YTD settlement high of $32.205/oz on May 20.
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For the week, gold gained 1.9% as rising safe-haven demand due to Middle East tensions and expectations of Fed rate cuts added to the metal’s appeal; silver lost 1.4% on the week.
The 10-year Treasury yield and Barclays Global Aggregate Bond yield have reached their lowest levels since March, which is “bullish for gold given its inverse correlation with yields,” Tim Hayes of Ned Davis Research told Marketwatch, noting that gold’s “competitive advantage” with bonds improves when yields decline.
If the economic and political environment becomes “more favorable for gold – for example, with growing weakness in the dollar because of rate cuts – a trading range for the metal of between $2,500 and $2,700 could be possible,” according to George Milling-Stanley of State Street Global Advisors.