Gold prices surged by up to 0.4% to reach $2,568.06 per ounce on Friday, positioning the precious metal for a weekly gain nearing 3%. This uptick follows a recent high achieved after the euro strengthened against the U.S. dollar. The rise in gold prices comes as investors adjust their expectations regarding future actions by the European Central Bank (ECB), which had lowered rates earlier in the week but is now less likely to implement another cut next month.
The significant rally in gold, which has appreciated by nearly 25% this year, is driven by a combination of factors. The Federal Reserve’s commitment to monetary easing has provided robust support for gold prices. Additionally, central bank purchases and heightened demand for safe-haven assets, spurred by ongoing geopolitical conflicts in the Middle East and Ukraine, have contributed to gold’s upward trajectory. Increasing interest from retail investors further bolsters the metal’s appeal.
Market participants are also processing recent U.S. economic data. On Thursday, reports indicated a rise in unemployment benefit applications and a slight increase in the producer price index (PPI) for August. Despite this, the core categories that influence the Federal Reserve’s preferred inflation measure showed little change.
According to Jun Rong Yeap, a market strategist at IG Asia Pte, the PPI data provides “some room for the Fed to consider more aggressive cuts ahead.” Yeap noted that gold’s continued rise and its breach of previous resistance levels suggest a projected price target of $2,670 per ounce.
The ascent in gold prices may also be linked to investors closing out bearish positions. Data from the week ending September 3 reveals that money managers had their highest gross short positions in Comex gold futures in four weeks.
Chris Weston, head of research at Pepperstone Group Ltd, highlighted that gold is increasingly being used as a portfolio hedge. The weaker labor market report from Thursday may have prompted fund managers to view gold as a safe haven, particularly if economic conditions worsen, thus further boosting prices.
At 10:38 a.m. Singapore time, spot gold had risen by 0.2% to $2,564.05. The Bloomberg Dollar Spot Index also saw a 0.2% decline, adding to losses from the previous session. Alongside gold, other precious metals such as silver, palladium, and platinum also experienced gains.
