US Labor Data Weighs on US Dollar, Gold Prices Soar
Gold prices surged to their highest level since June 18 on Wednesday as weaker-than-expected US labor market data weighed on the US Dollar. The XAU/USD pair jumped over 3.50% and is currently trading at $4,230.
The ADP Employment Change report showed a rise of only 44K in July, missing forecasts of 70K and slowing from 98K in June. This softer data has put downward pressure on the US Dollar, causing gold prices to rise as investors seek safe-haven assets.
Strategists at ING noted that lower energy prices have eased some inflation concerns, providing a more supportive backdrop for bullion. However, they also pointed out that markets continue to assess the outlook for US monetary policy following last week's Federal Reserve meeting, leaving gold 'caught between improving geopolitical sentiment and ongoing uncertainty over US interest rates.'
Despite fading rate-hike bets, expectations of a September Fed rate hike have weakened, with the CME FedWatch Tool showing the probability falling to 56.9% from 67.2% a day earlier.