Gold prices moved higher on Friday after weaker-than-expected U.S. payroll data reduced concerns about further interest rate increases.
The precious metal was heading for its first weekly gain in five weeks after falling to an eight-month low earlier in the week.
Gold Prices Rebound After U.S. Jobs Report
Spot gold climbed 1.2% to $4,173.53 per ounce by 05:48 ET, or 09:48 GMT.
Gold futures gained 1.5% to $4,185.75 per ounce.
Over the past week, spot gold was up approximately 2%.
Trading activity remained subdued ahead of the U.S. market holiday on Friday.
Weak Payroll Data Reduces Fed Rate Hike Bets
Gold prices began their sharp recovery on Thursday after U.S. nonfarm payroll figures came in below market expectations for June.
The weaker employment data reduced expectations that the Federal Reserve would raise interest rates later this year.
A strong labour market is one of the main conditions that could encourage the central bank to tighten monetary policy further.
Lower rate hike expectations tend to support gold because the metal does not pay interest.
Gold Recovers From Heavy Quarterly Losses
The latest rally provided some relief after higher interest rate concerns placed significant pressure on gold during the second quarter.
Bullion lost around 13% during the June quarter and erased all of its gains for the year.
Investors had become increasingly concerned that elevated interest rates and bond yields would continue to reduce demand for precious metals.
Weaker Dollar Supports Precious Metals
The U.S. Dollar Index fell from near a 13-month high following the payroll report.
A weaker dollar usually makes commodities priced in the U.S. currency more affordable for international buyers.
The decline supported gains across the wider metals market.
Spot silver surged 2.4% to $62.4075 per ounce, while platinum rose 1.9% to $1,656.84 per ounce.
Federal Reserve Maintains Hawkish Tone
Despite the weaker jobs report, Federal Reserve policymakers have continued to signal a cautious approach towards inflation.
Officials adopted a hawkish tone during their June meeting.
Fed Chair Kevin Warsh also said the central bank remained committed to returning annual inflation to its 2% target.
These comments suggest that policymakers may not be ready to move quickly towards looser monetary policy.
OCBC Turns Cautiously Positive on Gold
Analysts at OCBC said the near-term outlook for gold had improved from cautious to cautiously constructive.
They said gold prices could extend their recovery if incoming U.S. economic data continue to limit real bond yields and weaken the dollar.
However, the bank warned that investors should remain careful.
Unemployment remains broadly stable, Federal Reserve commentary is still hawkish and inflation risks continue to concern policymakers.
High Yields Remain a Risk for Gold
OCBC lowered its annual gold price forecast earlier in the week.
The bank cited continued pressure from U.S. interest rate expectations and elevated bond yields.
It also reduced its outlook for silver prices.
Gold may continue recovering if U.S. data weaken further, but the outlook remains sensitive to inflation, Federal Reserve policy and movements in the dollar.
