Gold rises, yields retreat after softer US jobs data

Gold prices gained over 1% on Wednesday as bond yields fell after weaker-than-expected US private payrolls data bolstered expectations that the Federal Reserve would cut interest rates later this year.

Spot gold was up 1.2% at USD 2,355.49 per ounce, as of 1830 GMT, after a 1% fall in the previous session. US gold futures settled 1.2% higher at USD 2,375.50.

Benchmark US Treasury yields fell to their lowest since April 5 after data showed US private payrolls increased less than expected in May.

A weak labor number adds fuel to the fire that the Fed may have to cut rates before year-end, boosting gold’s appeal, said Bob Haberkorn, senior market strategist at RJO Futures. Lower interest rates decrease the opportunity cost of holding non-yielding gold.

According to the CME FedWatch Tool, traders now see about a 71% chance of a Fed rate cut by September, versus below 50% last week.

The non-farm payrolls report scheduled for Friday is highly awaited by traders as it will have the potential to influence gold prices, analysts said.

“If we see the US Payrolls drop significantly on Friday, the market will be a lot more comfortable in thinking that the Federal Reserve could start cutting (interest rates) in sometime in late summer September,” said Bart Melek, head of commodity strategies at TD Securities.

On the physical front, net purchases of gold by global central banks rose to 33 metric tons in April from a revised net buying of 3 tons in March, the World Gold Council (WGC) said, signaling the sector’s continuing strong appetite for the metal despite high prices.

Among other precious metals, spot silver rose 1.7% to USD 29.99 per ounce, platinum was up 0.6% at USD 993.45 per ounce and palladium gained 1.7% to USD 931.18 per ounce.

(Reporting by Rahul Paswan in Bengaluru; Editing by Ravi Prakash Kumar and Vijay Kishore)