Gold Rallies to Seven-Week High as Fed Hike Odds Plummet

The gold price rallied to a seven-week high after the US July payrolls report showed a loss of 23,000 jobs against an expected gain of 80,000. This led to a drop in Treasury yields and the dollar, making gold more attractive as its opportunity cost fell.

Gold broke above the $4,000-$4,200 range on Wednesday and cleared key resistance levels before the payrolls report was released. The spot price reached $4,429.30, up 3.02% from the previous day's close.

The Federal Reserve's decision to keep interest rates unchanged has been priced in by markets, but the probability of a September hike is still 46%. This uncertainty has led to a fragile situation for gold, as it depends on the Fed staying parked and not tightening monetary policy.

Real yields are the key variable driving gold prices. A threshold of 2.5% on the 10-year TIPS yield marks the level at which gold's opportunity cost becomes prohibitive, leading to sustained Western ETF liquidation. Friday's decline in real yields has been a bullish configuration for gold.