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Gold set for first weekly gain in three weeks as US dollar, yields decline

June 7, 2024

Key points:

  • Weaker labor data could boost gold prices, according to analysts.
  • The U.S. non-farm payrolls data is due at 1230 GMT.
  • Gold is expected to reach another record high this year.

Gold prices held steady on Friday and were on track for their first weekly gain in three weeks. Traders are betting that the U.S. Federal Reserve will start cutting rates soon, which has sent the dollar and Treasury yields lower.

Spot gold was little changed at $2,377.13 per ounce as of 0321 GMT, with bullion gaining about 2% so far this week. U.S. gold futures rose 0.2% to $2,396.00.

Forex chart showing XAU/USD trading activity with moving averages (5, 10, 20, 30) and MACD indicator. The gold prices are holding steady at $2,379.48, aiming for their first weekly gain in three weeks. This stability is influenced by declining US dollar and Treasury yields as traders bet on potential rate cuts by the U.S. Federal Reserve. The article discusses gold's performance in the context of broader market movements and economic expectations.

Picture: Upside prevails for gold. Download the VT Markets app now.

Dollar and treasury yields drop, boosting gold’s appeal

The dollar hovered close to an eight-week low, and the benchmark 10-year U.S. Treasury yield fell to as low as 4.275% on Thursday, its lowest since April 1. This environment makes bullion more attractive for investors.

Markets are now looking forward to the U.S. non-farm payrolls data at 1230 GMT. There is a possibility that jobs growth may come in below the 185,000 median forecast of economists.

Weak data fuels rate cut expectations

A series of weaker macroeconomic data this week has added to signs that inflation is cooling. This has increased the likelihood that the Fed will start cutting rates as early as September. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, making gold more attractive.

Gold prices are expected to hit another record high this year, driven by a combination of factors, including U.S. rate cut expectations, central bank buying, and geopolitical tensions. This underpinned bullion demand, pushing prices to a record high of $2,449.89 on May 20.

You might be interested: 4 reasons why traders flock to safe-haven gold during global political tensions

In other metals, spot silver fell 0.4% to $31.16 per ounce, platinum was up 0.3% at $1,006.15, and palladium lost 0.4% to $925.75. The outlook for these metals also depends on broader economic indicators and investor sentiment.

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