Gold Prices Climb Amid Global Market Volatility
Gold prices experienced a notable surge in Asian trade on Friday, approaching a record high. This increase was driven by a global market rout, reflecting heightened fears of an economic slowdown. Consequently, investors flocked to the safe haven of gold.
Spot Gold Prices Surge and Futures Performance
Spot gold rose by 0.5% to $2,458.49 an ounce. Simultaneously, gold futures for December delivery climbed 0.9% to $2,502.60 an ounce by 01:18 ET (05:18 GMT). This surge in gold prices is attributed to a combination of factors including a weakening dollar and declining Treasury yields.
Safe Haven Demand and Market Sentiment
The recent tensions in the Middle East, following the killing of a Hamas leader, further fueled demand for gold. Additionally, the recent weak U.S. economic data, including the purchasing managers index and employment figures, heightened concerns over a potential slowdown in the U.S. economy. These developments contributed to steep declines in Wall Street and sparked a broad risk-off move across global markets.
Federal Reserve’s Role and Interest Rate Cuts
The Federal Reserve’s indication of a potential interest rate cut in September added to the bullish sentiment for gold. Markets now anticipate a 25 basis point rate cut, which is expected to support gold prices. Lower interest rates diminish the opportunity cost of holding non-yielding assets like gold.
Focus on Upcoming Nonfarm Payrolls Data
Attention is now on the upcoming nonfarm payrolls data for further insights into the U.S. labor market. A cooling labor market could reinforce the prospect of additional interest rate cuts by the Fed. This expectation is likely to maintain upward pressure on gold prices.
Industrial Metals: Copper Faces Continued Decline
In contrast, industrial metals like copper faced challenges. Copper prices rebounded on Friday but were set for a fourth consecutive week of losses. This trend is driven by growing concerns about global economic growth impacting demand. Benchmark copper futures on the London Metal Exchange rose 0.2% to $9,073.0 per tonne. However, the overall sentiment remains cautious due to weak PMI readings from both the U.S. and China, indicating a slowdown in manufacturing activity.
