Gold prices are on track for their third consecutive weekly gain as investors await a crucial U.S. jobs report that could strengthen expectations for an interest rate cut by the Federal Reserve later this month. The precious metal is currently trading around $3,542 an ounce, having retreated from its recent peak of $3,578.51, which was achieved earlier this week. The surge in gold prices followed a notable decline in job openings, prompting markets to nearly fully discount a rate reduction in September.
This decline in interest rates is particularly beneficial for gold, which does not earn interest, thereby increasing its attractiveness in a lower-yield environment. Additionally, gold has drawn support from heightened demand for safe-haven assets amid concerns regarding the trajectory of U.S. monetary policy.
Market participants are now preparing for a key payroll report anticipated this Friday, which is expected to indicate a continuation of the weakest job growth in the U.S. since the pandemic began. Such data would reinforce indications of a cooling labor market. This speculation was bolstered by recent Treasury yield declines, which have reached their lowest levels in several months, following a report showing jobless claims rising to their highest level since June.
Despite recent gains, technical indicators suggest that gold may have entered overbought territory this week. Nonetheless, the metal remains up over a third this year, positioning it as one of the standout performers among major commodities. This upward momentum in prices originates from Federal Reserve Chair Jerome Powell’s cautious hints at potential cuts last month.
Alongside gold, silver has exhibited an even more formidable performance this year, with prices surging over 40%. Earlier this week, silver prices crossed the $40 mark for the first time since 2011. This metal holds dual value, functioning both as a financial asset and an industrial commodity critical for clean-energy technologies, particularly in solar panels. The market is expected to face a fifth consecutive year of deficits, according to the Silver Institute.
Investors are increasingly flocking to silver-backed exchange-traded funds, pushing holdings to grow for the seventh month in a row as of August. This heightened interest has resulted in a drawdown of available metal in London, causing ongoing tightness in the market. Lease rates for silver, indicating the cost of borrowing the metal, surged past 5% this week, significantly higher than the typical levels closer to zero.
As of 7:50 a.m. in Singapore, spot gold was up 0.2% to $3,542 an ounce, positioning the metal for a 3% weekly gain—the most substantial increase since mid-June. The Bloomberg Dollar Spot Index remained steady but has seen a 0.5% rise since the beginning of the week. Silver prices rose to approximately $40.75 an ounce after experiencing a 1.3% decline the previous day, with both platinum and palladium also showing slight increases.
