Gold gains as investors anticipate super-sized Fed rate cut

Gold prices rose to near one-week highs on Thursday, on the back of a weaker US dollar and lower yields after signs of the labor market losing steam led investors to expect a super-sized rate cut from the Federal Reserve this month.

Spot gold was up 0.9% at USD 2,515.93 per ounce by 2:03 p.m. ET (1803 GMT), rising as much as 1.1% earlier in the session. Prices slightly pared gains after the US services sector data.

US gold futures settled 0.7% higher at USD 2,543.10.

US private employers hired the fewest number of workers in 3-1/2-years in August, potentially hinting at a sharp labor market slowdown. This follows data on Wednesday showing a sharp decline in US job openings in July.

After ADP data, there was a gold spike and it really shows “the labor market is in a dire state and there is a lot of concern about it,” said Phillip Streible, chief market strategist at Blue Line Futures.

“The initial claims data didn’t really help either as far as painting a rosy picture for the employment.”

Traders currently see a 59% chance of a 25-basis-point (bp) reduction by the US central bank this month and a 41% chance of a 50-bp cut, according to the CME FedWatch tool.

The Fed needs to cut interest rates to keep the labor market healthy, but it is now down to incoming economic data to determine by how much, San Francisco Fed President Mary Daly said on Wednesday.

Attention turns to the upcoming non-farm payrolls (NFP) report on Friday.

“If the August unemployment rate matches July’s 4.3%, its highest since 2021, that should send gold back towards its record high as markets ramp up bets for a jumbo-sized rate cut,” said Han Tan, chief market analyst at Exinity Group.

Elsewhere, spot silver gained 1.9% to USD 28.82, platinum climbed 2.7% to USD 926.74 and palladium rose 0.9% to USD 942.36.

(Reporting by Anushree Mukherjee and Daksh Grover in Bengaluru, additional reporting by Swati Verma; Editing by Krishna Chandra Eluri and Janane Venkatraman)