Gold Holds Above $4,300 per Oz as Rate-Cut Bets and Central Bank Buying Build
Key Takeaways
- •Gold traded near $4,340 per ounce after climbing nearly 7% last week, holding above $4,300 for the first time since June.
- •An unexpected decline of 23,000 U.S. jobs in July strengthened expectations that the Federal Reserve has less room to raise interest rates despite persistent inflation concerns.
- •Hedge funds and money managers raised bullish gold bets to the highest level in more than six months, according to the latest CFTC data.
- •China's central bank increased its gold reserves in July by the largest amount since October 2023, adding to broad structural demand from central banks across multiple countries.
- •Gold remains nearly twenty percent below levels recorded before the Iran war began, reflecting the metal's volatile response to the ongoing Middle East conflict.
Gold held above $4,300 per ounce for the first time since June on Monday, supported by weak U.S. employment data, stronger investor positioning, and increased Chinese central bank purchases.
The metal traded around $4,340 per ounce after climbing nearly 7% last week, remaining above its 60-day moving average. Gold had spent roughly a month hovering just above $4,000 per ounce before the latest rally began.
The move followed an unexpected loss of 23,000 U.S. jobs in July, according to Mining.com, strengthening expectations that the Federal Reserve may have less room to raise interest rates even as inflation remains a concern. The report marked a shift from earlier in the year, when sticky price pressures had reinforced the case for keeping borrowing costs elevated.
Hedge funds and money managers increased their bullish bets on bullion last week to the highest level in more than six months, according to the latest Commodity Futures Trading Commission data.
Rate Outlook
The Fed faces an increasingly difficult inflation outlook as the months-long war in the Middle East adds uncertainty to price pressures and the broader economy.
Gold typically benefits from expectations of lower interest rates because the metal does not pay interest, making it relatively more attractive when yields decline. Central banks across multiple countries have also been steadily accumulating gold reserves in recent years, according to World Gold Council data, adding a layer of structural demand that extends well beyond China's monthly purchases.
China is also providing support. The country's central bank increased its gold reserves in July by the most since October 2023, adding another source of demand for the precious metal.
The combination of weaker U.S. employment, greater speculative positioning, and central bank purchases has strengthened bullion after its prolonged stretch near $4,000 an ounce.
War Pressure
Gold remains nearly a fifth below the levels recorded before the Iran war began, underscoring the precious metal's volatile response to the conflict.
With no resolution to the war in sight, geopolitical uncertainty remains an important influence on bullion alongside the outlook for U.S. inflation and monetary policy.
The next test is whether those forces can sustain bullion's renewed rally.