Gold climbed more than 1% on Friday and was on track for its first weekly advance in five weeks, as investors scaled back expectations for further US interest rate hikes following weaker-than-anticipated labour market data, according to a Reuters report.
Spot gold rose 1.3% to $4,177.31 per ounce as of 0416 GMT, reaching its highest level since June 23. US gold futures for August delivery gained 1.6% to $4,190.70. Bullion was on course for a weekly gain of 2.2%, its first since the week ended May 29, as a string of soft economic data tempered inflation and higher-for-longer interest rate concerns.
Weaker Labour Data Fuels Rate-Hike Repricing
The primary catalyst was Thursday's US jobs report. Non-farm payrolls increased by only 57,000 jobs last month, sharply below the 110,000 expected by economists in a Reuters poll, the report noted. Softer-than-expected private payrolls data also contributed to the shift in sentiment. The dollar weakened, heading for a weekly drop, making greenback-priced bullion more affordable for holders of other currencies.
"What we're seeing is a reduction in the pricing of Federal Reserve interest rate hikes for the rest of this year, as well as Q1 next year, and that has been primarily driven by a rather lacklustre labour market data yesterday," said Kelvin Wong, senior market analyst at OANDA.
Traders have repriced the likelihood of a rate hike in September. According to the CME FedWatch Tool, the probability has fallen to approximately 54%, down from 66% before the data release. The table below summarises the shift:
| Rate Hike Probability | Before Jobs Data | After Jobs Data | Change |
|---|---|---|---|
| September 2026 | 66% | 54% | -12 pp |
Higher interest rates typically weigh on non-yielding gold, as they make interest-bearing assets more attractive.
Central Bank Buying Provides Additional Support
On the demand side, central banks continued to add to their gold reserves. The World Gold Council reported that official gold reserves increased by a net 41 tonnes in May, signalling that central banks are "back in buying mode" after a previous lull, the report stated.
Other Precious Metals Also Rally
Precious metals broadly advanced alongside gold. Spot silver rose 2.3% to $62.41 per ounce, platinum gained 2.5% to $1,656.05, and palladium climbed 1% to $1,281. All three metals were near their highest levels in more than a week and were headed for weekly gains.
Downside Risks Remain
Despite the near-term uplift, analysts caution that the rally may not be sustained. Wong noted that "rate-hike expectations have not fully disappeared," and gold could still face pressure later this year, with prices potentially falling towards $3,500 an ounce. Traders will closely monitor upcoming US inflation data and Fed commentary for further direction.
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