Gold prices held close to $4,500 an ounce on Friday after gaining nearly 2% in the previous session.
Traders are now waiting for the latest US payrolls report for fresh clues on whether the Federal Reserve could keep interest rates unchanged at its September meeting.
A weaker US dollar and comments from Federal Reserve Governor Christopher Waller helped support gold prices. Waller indicated that he could favor keeping rates steady if inflation continues to cool.
Gold Holds Near $4,500 After Strong Rebound
At 21:18 ET, spot gold was up around 0.3% at $4,484.27 an ounce.
Gold futures traded near $4,530 an ounce.
Silver was around $65.80 an ounce, while platinum traded close to $1,775.
Meanwhile, the US Dollar Index remained lower near 99.4.
Gold’s latest move follows a strong rebound on Thursday, when prices climbed almost 2% and ended a three-session losing streak.
Waller Comments Reduce Fed Rate Hike Bets
Gold gained further support after Waller suggested that he could back unchanged interest rates at the Federal Reserve’s September 15-16 meeting.
He said upcoming inflation data would be an important factor in his decision.
Waller also noted that recent figures are finally showing signs of disinflation.
However, he did not completely rule out another rate hike if inflation pressures strengthen again.
Markets have responded by cutting expectations for a September increase.
The probability of a rate hike has fallen to around 50%, down from roughly 70% earlier in the week.
Lower Rates Support Gold Prices
Expectations for lower interest rates are generally positive for gold.
Gold does not pay interest. Therefore, it often becomes more attractive when yields on interest-bearing assets decline.
A weaker US dollar has also supported bullion prices.
The dollar came under pressure as the Japanese yen strengthened sharply on Thursday.
The yen recorded its strongest daily gain since Japanese and US authorities intervened in currency markets just over a month ago.
A weaker dollar can make gold cheaper for investors using other currencies, potentially increasing demand.
US Payrolls Report Takes Center Stage
Friday’s US nonfarm payrolls report is now one of the most important events for gold traders.
The data could influence expectations for the Federal Reserve’s next policy decision.
A weaker jobs report could strengthen the case for keeping rates unchanged.
However, stronger employment data could give the Fed more room to tighten monetary policy.
Investors are also preparing for next week’s US inflation figures, which could provide another major signal for interest rates.
Gold Recovers From Four-Week Low
Gold’s latest rebound follows a much sharper decline earlier in the week.
Prices had fallen to around $4,282 an ounce, their lowest level in almost four weeks, before buyers returned.
Tony Sycamore, senior market analyst at IG, said gold benefited as pressure from energy prices, Treasury yields and the US dollar eased.
He also pointed to improving market sentiment after signs that the latest escalation in the Middle East may have started to cool.
Key Technical Levels Remain in Focus
Sycamore said gold continues to trade above its late-June low near $3,942.
That level supports his medium-term view that bullion has formed a base in that area.
However, gold recently broke below its 200-day moving average near $4,526.
That move caused some short-term technical damage, although it has not changed the broader outlook.
The $4,500 area and the 200-day moving average are likely to remain important technical levels for traders.
Middle East Tensions Still Matter for Gold
Gold prices also remain sensitive to geopolitical developments in the Middle East.
Earlier fighting pushed oil prices higher and renewed concerns about inflation.
Higher energy costs can complicate the outlook for interest rates and place pressure on gold.
More recently, easing energy-market pressure has reduced some of that headwind.
For now, traders are watching US jobs data, inflation figures, the dollar and Federal Reserve expectations for the next major move in gold.
