Gold Hits 2-Month High
Gold prices surged above US$4,350 per troy ounce during Friday's trading (August 7), marking a two-month high. The rise followed US labor data showing weakness and a renewed decline in energy prices.
The US economy unexpectedly shed jobs in July, while wage growth and the labor force participation rate also softened. These conditions fueled market skepticism regarding the need for the Federal Reserve to raise interest rates in the near term.
Oil prices losing momentum again also provided a boost to gold. Cheaper energy can alleviate inflationary pressures, thereby reducing the likelihood of a Fed rate hike, even amidst persistent uncertainty regarding the Iran-US situation in the Strait of Hormuz.
US government bond yields fell following the release of the labor data. This drop in yields acted as a positive factor for gold, as the opportunity cost of holding non-yielding assets decreased.
Gold demand also received support from institutional investors in China. Data indicates that positions in gold-backed assets are increasing as investors seek a hedge against volatility in technology stocks, while physical demand and central bank buying remain robust.
Newsmaker Analysis: Gold's momentum has turned bullish again after breaking through the US$4,350 level. As long as expectations for Fed rate hikes continue to decline and US yields remain weak, gold has the potential to extend its gains. However, following the sharp rally, the possibility of profit-taking in the short term warrants caution.
Source: Newsmaker.id
