Gold prices have established a base just below the $3,400 mark as investors remain committed to the precious metal in the face of a weakening US jobs market and the Federal Reserve’s anticipated rate cut.
Gold was trading at $3,375 at the time of writing.
“Gold has surged in recent sessions and is holding above the $3,350/oz level. In the short term, the main narrative remains the expectation that the Fed will pivot to easing after Jackson Hole. The Federal Reserve acknowledged risks in the labor market and left the door open to potential rate cuts, prompting markets to reprice the policy outlook,” said Linh Tran, Market Analyst at XS.com.
Tran continued to explain that gold is being supported by weakness in the dollar and real yields amid an overall softening of financial conditions in the US.
“This directly affects the two key variables that drive gold prices: real yields and the U.S. dollar. If real yields (TIPS) decline further and the dollar weakens, the opportunity cost of holding gold decreases, thereby continuing to support the precious metal. Conversely, any “hawkish” signals that push the yield curve higher could trigger a short-term correction in gold.
“Overall, the U.S. growth picture appears to be “softening”: jobless claims have edged up, some regional manufacturing indices have weakened, and consumer confidence has slowed. As growth eases and inflation trends lower, financial conditions are gradually loosening. However, caution is warranted with the risk of persistent inflation if energy prices or shipping costs rebound. In that case, the Fed could slow its pace of easing or signal “higher-for-longer” rates, creating headwinds for gold.”