Gold Bounces as US Dollar Weakens and Rate Hike Bets Fade
Gold rebounded on Friday from its fresh weekly low of $4,311 as the US Dollar softened and bets on an imminent Federal Reserve interest rate hike faded.
The precious metal now trades around $4,350, supported by these factors. However, it remains below the two-month high of $4,449 touched on Thursday.
US economic data released this week showed cooling inflationary pressures, with weaker-than-expected July Nonfarm Payrolls and sharp downward revisions to previous months' figures casting doubt on the strength of the labor market.
This has pushed front-end Treasury yields lower and kept the US Dollar Index below 100. Analysts at MUFG noted that the slowdown in private employment and wage growth, along with limited evidence of higher energy prices spilling over into core inflation since the US-Iran conflict started, is providing more leeway for the Fed to leave rates on hold.
According to the CME FedWatch Tool, traders are now pricing in around a 70% chance that the Fed will keep borrowing costs unchanged in September. This creates a supportive near-term backdrop for Gold, but the inflation outlook remains uncertain.