Gold surged on Friday and is on track for its best week since January, as softer US labour data alongside optimism over a Middle East peace deal lowered expectations of a Fed rate hike.
Spot gold shot up as much as 3.1% to about US$4,372 ($6,190) an ounce, its highest in nearly two months. This extends the metal’s weekly rise to 8%, its best performance since the late-January rally that saw prices hit a record of nearly US$5,600 an ounce.
Hopes of peace in the Middle East saw inflation expectations drop, allowing gold to move out of a multi-week consolidation, an analyst at StoneX told Reuters, highlighting US$4,000 as a solid support for dip buyers.
Since the US-Iran war started in late February, gold has lost nearly 20% of its value as markets anticipated the Fed to start hiking rates, which hurts the appeal of non-yielding assets like bullion.
The market currently sees a 55% chance of a rate hike in September, down from 63% a week ago, according to the CME FedWatch Tool.
The July jobs report also lifted bullion as it indicated a much weaker-than-expected US labour market, showing a loss of 23,000 jobs compared with the 83,000-job expansion pegged by Wall Street. A weaker economy disincentivises policymakers to raise rates.
UBS sees US$5,000
Despite a potential headwind from rate hikes, many see gold rallying higher in the coming months.
On Friday, UBS said it sees prices reaching US$5,000 in the first half of 2027 as inflation gradually moderates. The Swiss bank also cited the strong inflows into gold-backed exchange-traded funds in China.
“But while the immediate backdrop may remain volatile, the medium- to long-term case for gold still looks supported by several durable drivers,” UBS wrote in a note.
Write to Jackson Chen at Mining.com.au
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