Gold prices reached unprecedented heights, buoyed by the latest U.S. employment data, which hinted at a potential shift in the Federal Reserve's monetary policy. On Friday, spot gold climbed by 0.5% to $2,170.55 per ounce, while U.S. gold futures saw a 0.9% increase to $2,185.50. This surge is part of a broader upward trajectory for gold, culminating in a weekly performance that marks its most significant increase since mid-October.
The rally was ignited by a report indicating a rise in the U.S. unemployment rate alongside moderated wage gains, despite an acceleration in job creation for February. This combination of factors has led to heightened expectations among traders that the Federal Reserve might commence rate cuts as early as May, with a 30% probability, though a June adjustment remains more widely anticipated at 73%.
David Meger, Director of Metals Trading at High Ridge Futures, highlighted the enduring premise underpinning gold's ascent: "The expectation that the Fed is still going to cut rates later this year and dollar weakness." This sentiment was reflected in the dollar index's slight decline, enhancing gold's appeal to international buyers. Concurrently, yields on 10-year U.S. Treasury notes dipped to a low not seen in over a month, further amplifying gold's allure.
Gold's status as a safe-haven asset has been reinforced amidst growing signs of easing inflationary pressures, with low-interest rates bolstering its attractiveness by diminishing the opportunity cost associated with holding bullion. According to Tai Wong, an independent metals trader based in New York, "This (jobs) report will be seen as one that keeps the Fed on course for June. Gold prices will continue to trend higher overall, though a short consolidation may be necessary."
The precious metal's record-breaking streak was echoed in London's gold market, where the price benchmark soared to a new high of $2,171.30 per troy ounce during an afternoon auction, as reported by the London Bullion Market Association (LBMA).
While gold shone brightly, other precious metals experienced mixed fortunes. Spot silver declined by 0.3% to $24.25, platinum fell by 0.9% to $910.10 per ounce, and palladium dropped by 1.8% to $1,015.50. Despite these variances, all three metals were on track for weekly gains.
Gold's peculiar allure, transcending its practical applications, is rooted in its historical and psychological significance. As a symbol of wealth and a hedge against economic uncertainty, gold attracts investment during turbulent times. Current global anxieties, from geopolitical tensions to economic downturns in major economies, have propelled gold to its current zenith, reflecting the adage that "scared money" can indeed find refuge and potential growth in this timeless asset.
