Gold prices experienced a significant surge, jumping 2.3 per cent to $US3359.20 an ounce. This rally was primarily driven by a sharp deceleration in US jobs growth, which has heightened expectations of potential interest rate cuts by the Federal Reserve as early as September. Swap markets are now factoring in a rate cut by October, with a strong possibility of an earlier move, following the release of data indicating a notable slowdown in jobs growth over the past three months.
The prospect of lower interest rates sent US Treasury yields tumbling and weakened the US dollar, thereby increasing the appeal of gold as an investment. Gold typically performs well in environments characterised by lower interest rates. This upswing in gold prices effectively reversed earlier losses that had been triggered by stronger-than-expected US economic data earlier in the week.
ANZ noted that the weaker labour market data has reinforced the market’s expectation of a more dovish stance from the Federal Reserve in its upcoming policy decisions. Gold also benefited from safe-haven buying, which was prompted by the White House’s announcement of plans for substantial reciprocal tariffs.
Bloomberg has estimated that the average US tariff rate is set to rise to 15.2 per cent, a considerable increase from the 2.3 per cent recorded last year. These factors combined have created a conducive environment for gold, driving its price upwards as investors seek both returns and safe-haven assets amid economic uncertainty.
