Gold and silver prices climbed sharply in international markets on Friday (July 3), with bullion headed for its first weekly gain in five weeks as weaker-than-expected US employment data eased fears of aggressive interest rate hikes by the US Federal Reserve.
COMEX gold surged nearly 2% to $4,202.80 per ounce, touching an intraday high of $4,206.70 an ounce, while COMEX silver jumped 2.82% to $62.785 per ounce. The sharp move reflects renewed investor interest in precious metals after recent economic data pointed to a cooling US labour market.
The latest US nonfarm payrolls report showed the economy added only 57,000 jobs last month, far below market expectations of 110,000. Earlier, private payroll data had also disappointed, with ADP figures showing job additions of 98,000 against forecasts of 118,000. The softer data strengthened expectations that the Federal Reserve may avoid further aggressive rate hikes in the near term.
Why does this matter for gold and silver?
Precious metals generally perform better when interest rate expectations soften. Lower rates reduce the opportunity cost of holding non-yielding assets like gold and silver, making them more attractive to investors.
Following the data release, traders reduced expectations of a September rate hike. Market pricing through the CME FedWatch Tool showed the probability of a rate increase falling significantly from earlier levels, boosting sentiment across bullion markets.
Adding to the momentum, falling crude oil prices helped calm inflation concerns, while geopolitical developments, particularly renewed Iran-US discussions around the Strait of Hormuz, also increased safe-haven buying interest.
Market experts say the rally is being driven by a combination of economic uncertainty and investor positioning.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions and President of the India Bullion and Jewellers Association, said gold and silver rebounded strongly from recent lows after weaker US jobs data and easing inflation fears improved market sentiment. According to him, expectations of a softer Federal Reserve stance, combined with geopolitical tensions, supported fresh buying in bullion.
Meanwhile, central bank demand also remained supportive for gold prices.
The World Gold Council said official gold reserves globally increased by a net 41 tonnes in May, indicating that central banks have resumed buying after a brief pause.
Analysts believe upcoming US inflation data and comments from Federal Reserve officials will now be closely watched for further direction in bullion prices. For now, however, softer economic signals have shifted sentiment back in favour of gold and silver.
-With Reuters inputs