Gold rises near record highs again
Gold prices on Friday witnessed a significant rise, reaching about 3,550 dollars per ounce, in a move closer to setting a new record high after touching 3,578 dollars earlier in the week.
The precious metal is heading for weekly gains of more than 3%, in light of the supportive environment witnessed by the market.
Faltering job data and expectations of interest rate cuts
The weekly US labor market data had the greatest impact in strengthening the buying trends on gold.
The data showed a decline in job opportunities, and applications for initial unemployment benefits rose to the highest level in two months.
These weak indicators have prompted traders to increase their bets on the Fed cutting interest rates next September, with up to three cuts expected before the end of the year.
Investors are also looking forward on Friday to the announcement of the non-farm payrolls report (NFP) in the United States, which will give a clearer view on the health of the world's first currency economy, and determine further the course of monetary policy expectations and gold prices during the coming sessions.
Why does the interest rate cut affect gold
The interest rate is one of the main factors driving the price of gold, due to reducing the opportunity cost as gold is an asset that does not generate income.
When interest rates fall, the returns that investors give up to own gold instead of fixed-income assets (such as bonds) decrease, making it more attractive.
Geopolitical tensions and the demand for safe haven
Besides economic factors, there are still strong tailwinds supporting the demand for gold as a traditional safe haven:
- Continued economic uncertainty and risks around global trade.
- The escalation of geopolitical tensions in more than one region.
- Concerns about the independence of the Federal Reserve after the recent statements of President Trump.
Other factors that have supported gold prices since the beginning of the year so far, such as the weakening of the US dollar and strong central bank buying, are also expected to continue in the future.
