TLDR
- Gold futures rose 1% to $4,166/oz after weak U.S. jobs data cut rate hike expectations
- Gold posted its first weekly gain since May, surging over 2% last week
- The dollar recovered from near two-week lows on Monday, pushing gold lower
- Spot gold fell 0.6% to $4,151.66 on Monday as the dollar clawed back losses
- Fed minutes from the June meeting are due this week and could move markets
Gold prices had a mixed start to the week. After posting their first weekly gain since May, gold reversed course on Monday as the dollar bounced back.
Spot gold fell 0.6% to $4,151.66 an ounce in early Monday trading. Gold futures dropped 0.7% to $4,167.29 per ounce.
Last week was a different story. Gold surged more than 2%, its best week since mid-May, driven by a weak U.S. jobs report.
The nonfarm payrolls print came in below expectations on Thursday. That caused traders to scale back bets that the Federal Reserve has room to raise interest rates this year.
Why Interest Rates Matter for Gold
Gold does not pay interest or dividends. When interest rates rise, government bonds become more attractive compared to gold, which hurts demand for the metal.
That dynamic has weighed on gold for most of this year, pulling it well below its record highs set in January.
Lower oil prices also helped gold last week. A drop in crude, driven by resumed flows through the Strait of Hormuz and an OPEC+ output increase, eased inflation worries.
Less inflation pressure means less reason for the Fed to hike rates. That is generally positive for gold.
Dollar Recovery Caps Gold’s Gains
On Monday, the dollar index rose 0.1%, recovering from a near two-week low. That recovery put pressure on gold prices.
The greenback remains close to 13-month peaks hit in June. Sticky U.S. inflation has kept markets uncertain about where interest rates are headed.
Analysts at Saxo Bank noted that short-dated U.S. bond yields still signal a risk of a rate hike later this year. They said a further easing in those expectations is needed to support gold prices.
Other precious metals also pulled back on Monday. Spot silver fell 1.1% to $61.74 per ounce. Spot platinum dropped 0.4% to $1,635.31 per ounce.
Markets are also watching for inflationary pressure from the artificial intelligence industry and rising global temperatures, both of which could push prices higher.
Fed policymakers signaled at their June meeting that sticky inflation may require at least one rate hike this year.
The minutes from that June meeting are due to be released this week. Traders are watching closely for any clues on the Fed’s next move and what it could mean for gold.
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