Gold Rallies to Seven-Week High as Oil Prices Plummet
Gold prices continued their upward trend on Friday, reaching a seven-week high and putting them on track for their biggest weekly gain since January. Spot gold was up 0.6% at $4,262.39 per ounce as of 0421 GMT, while US gold futures gained 0.5% to $4,321.50.
The main driver behind the surge in gold prices is weaker oil prices, which have dropped and are headed for a weekly loss. Lower energy prices ease inflation concerns and reduce expectations of higher-for-longer interest rates, making gold more attractive as an investment. According to Matt Simpson, a senior analyst at StoneX, hopes of peace in the Middle East have led to lower inflation expectations, allowing gold to surge higher from its multi-week consolidation above $4,000.
The upcoming US nonfarm payrolls (NFP) report for July is expected to provide clues on the interest rate outlook. Despite some uncertainty surrounding the NFP data, Simpson believes that 'US$4,000 has proven to be a solid support level, and I suspect bulls are waiting for dips to take advantage of a much-needed correction higher towards US$4,600.'