Gold Prices Soar on Weak US Jobs Data and Softening Fed Rate Hike Expectations

Gold prices are expected to remain firm in the near term due to a weaker-than-expected US labor market report. The report showed that non-farm payrolls unexpectedly fell by 23,000 in July, against expectations of an increase of around 85,000.

This has strengthened expectations of a softer Federal Reserve policy stance and reduced the probability of a September Fed rate hike to around 44%, from about 55% previously. As a result, US Treasury yields have fallen and the dollar is at a seven-week low.

Gold subsequently climbed to a seven-week high, gaining more than 8% during the week. Silver also rallied sharply, reflecting the broader improvement in precious metals sentiment.

According to Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, 'gold prices were set for their strongest weekly performance since late January, supported by a weaker U.S. dollar, softer crude prices and reduced expectations of a near-term Federal Reserve rate hike after a weaker-than-expected U.S. labor market report.'

Technical indicators are pointing to a continuation of the recovery if key support levels hold. The next major trigger for gold will be US inflation data, with the July Consumer Price Index (CPI) and Producer Price Index (PPI) due this week.