Gold Soars on Lower Rate Hike Expectations and Falling Oil Prices

Gold rallied 6% this week to its highest level in seven weeks, reaching $4,300 on Wednesday. The surge was driven by a single jobs number released that morning, which showed private employers added just 44,000 jobs in July, missing consensus expectations of around 70,000.

The ADP report sparked a drop in rate hike expectations for the Federal Reserve's September meeting, with probability falling from 67% to 57%. This led to lower Treasury yields, which compressed the opportunity cost of holding gold and allowed it to rise further.

However, tomorrow's NFP report will decide whether this repricing holds. A soft print near 80,000 or below could push hike probability down even further, supporting gold's current position, while a strong print above 120,000 would reverse much of the rate repricing that fueled this week's rally.

The market is also watching developments in the Strait of Hormuz, where Iran and Oman have agreed on coordinates for a proposed shipping corridor. Oil prices have fallen to around $74 per barrel, reducing the oil-driven inflation component that gave the Fed its strongest case for additional tightening.