Gold prices climbed to a seven-week high on Friday, driven by unexpectedly weak U.S. employment data that reduced expectations for further interest rate hikes by the Federal Reserve.

The precious metal was on track for its strongest weekly performance in seven months. The rally marks a notable shift for gold, which has faced headwinds over the past year from the Fed's aggressive monetary tightening campaign that lifted real yields and pressured non-yielding assets. Lower interest rate expectations tend to enhance gold's appeal relative to yield-bearing assets such as bonds, as gold itself does not produce interest income.

Silver and platinum prices also recorded notable gains in tandem with gold's rally, reflecting broad-based strength across precious metals.

The U.S. labor market data released on Friday showed surprising job losses, contrasting with expectations of continued employment growth. Labor market reports are among the most closely watched economic indicators for Fed policy decisions, as officials have signaled that the trajectory of employment and wage growth will heavily influence the timing and pace of any remaining rate moves this year. Weaker-than-expected employment figures are typically interpreted by markets as a signal that the Federal Reserve may pause or slow its monetary tightening cycle, since the central bank dual-mandate includes maximizing employment alongside maintaining price stability.

Gold is widely regarded as a traditional hedge against inflation and currency depreciation. When expectations for interest rate increases diminish, the opportunity cost of holding non-yielding assets like gold decreases, often supporting demand for the metal. The U.S. dollar and Treasury yields also typically respond to such data, with a softer dollar making gold less expensive for holders of other currencies. Market participants are now likely to scrutinize upcoming inflation readings and Fed communications for further clarity on the policy path.

Source: Economic Times Markets