Gold Prices Soar as Fed Rate Hike Bets Fall and Central Banks Buy In

Gold prices and gold-backed assets are experiencing a significant weekly surge due to expectations of Federal Reserve policy easing, institutional buying by central banks, and positive global ETF inflows.

The US gold equities and exchange-traded funds (ETFs) are on track to record their best weekly performance in over a year, with spot gold prices climbing above $4,200 per ounce.

Recent US non-farm payrolls data and labor market indications have strengthened market sentiment that the Federal Reserve will defer rate hike plans.

Cooling labor market data and expectations of dovish Fed policy are driving the rally in bullion-linked assets. The primary trigger behind gold's momentum stems from macroeconomic signals in the US, where recent payrolls data points to a cooling labor market.

According to the CME FedWatch tool, bets for a rate hike in September fell from 55% to 41.9%. Market observers expect that a gradual moderation in inflation combined with steady policy rates will eventually transition into an easy interest rate scenario, creating a favorable climate for precious metals while putting downward pressure on the US dollar.

Global gold ETF inflows have reversed in July, driven by European-listed funds adding 17.3 tonnes worth $2 billion as investors seized on price dips near $4,000 per ounce as strategic entry points. Official sector purchasing continues to provide a structural floor for bullion prices, with the People's Bank of China expanding its official gold reserves by 20 metric tons in July.

China's year-to-date official net purchases stand at 60 tonnes, raising total declared reserves to 2,366 tonnes. The Czech National Bank also increased holdings, adding 1.7 tonnes in July to bring its year-to-date total to 12 tonnes.