Gold marches higher as US jobs data boosts bets of early rate cut

© Reuters. File photo: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File photo

By Harshit Verma

(Reuters) -Gold prices were poised for their biggest weekly jump in five months on Friday, hovering near a historic high, as Federal Reserve Chair Jerome Powell’s remarks cemented mid-year interest rate cut bets, ahead of a U.S. key jobs report later in the day.

Spot gold was flat at $2,157.32 per ounce, as of 0601 GMT, hovering around a record peak of $2,164.09 hit on Thursday.

U.S. gold futures were flat at $2,164.60.

“While a spur of short-term speculative activity primarily driven by CTAs (Commodity Trade Advisors) and algorithmic trading prompted the gold rally, it’s very much this expectation of interest rate cuts in the not-too-distant future that’s backing it,” said Nikos Kavalis, managing director at Metals Focus.

Powell said that Fed was “not far” from gaining the confidence it needs in falling inflation to begin cutting rates, which he said are likely to happen in the coming months.

Traders are pricing in three to four quarter-point (25 bps) U.S. rate cuts, with a 75% chance for the first in June, as per LSEG’s interest rate probability app.

Lower rates boost the appeal of non-yielding bullion.

Another factor on why gold has been so solidly supported in recent weeks is the rally in procyclical asset classes, particularly equities as investors seek to diversify their risk exposure, Kavalis said.

This surge in gold prices could dampen consumption during the wedding season in India, but top buyer China will see robust safe-haven demand this year, analysts and traders said.

The dollar headed for its sharpest weekly drop of the year, making bullion less expensive for other currency holders. [USD/]

Market focus will be on key U.S. jobs data due at 1330 GMT.

Spot platinum fell 0.3% to $916.48 per ounce, silver was steady at $24.32, while palladium rose 0.5% to $1,039.07. All three metals were poised for a weekly gain.