Weaker dollar sets gold on track for first weekly gain in three

Bengaluru — Gold prices held steady on Friday, and were on track for their first weekly gain in three as traders stepped up bets that the US Federal Reserve will start cutting rates soon, sending the dollar and treasury yields lower.

Spot gold was little changed at $2,377.13/oz by 3.21am GMT. Bullion gained about 2% so far this week. US gold futures rose 0.2% to $2,396.00.

The dollar hovered close to an eight-week low and benchmark 10-year US treasury yield fell to as low as 4.275% on Thursday, its lowest since April 1, making bullion more attractive for investors.

“Gold prices have been holding up lately, as declining bond yields and a struggling US dollar has offered a supportive environment for the yellow metal,” said IG market strategist Yeap Jun Rong.

Markets now look forward to the US non-farm payrolls data at 12.30pm GMT, with the possibility that jobs growth comes in below the 185,000 median forecast of economists.

“It may have to take a significant downside surprise in labour conditions to convince the Fed for an earlier rate cut, given that inflation progress has broadly stalled around the 3% level. Any weaker labour market data could translate to upside in gold prices,” Jun Rong said.

A run of weaker macro data this week added to signs that inflation was cooling and that the Fed would start cutting rates as early as September.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Gold prices are expected to hit another record high in 2024 despite a dip in physical demand, consultancy Metals Focus said.

A cocktail of factors from US rate cut expectations, central bank buying to geopolitical tensions underpinned bullion's demand to hit a record high of $2,449.89 on May 20.

Spot silver fell 0.4% to $31.16/oz, platinum was up 0.3% at $1,006.15 and palladium lost 0.4% to $925.75.

Reuters