Gold prices surged on Monday, reaching a remarkable peak not seen in a month, defying predictions of a Federal Reserve pause on interest rate hikes. The slight retreat of the dollar and the prospect of the Fed holding off on rate increases contributed to the support for gold.
As of 0334 GMT, spot gold exhibited a 0.3% increase, reaching $1,945.40 per ounce, with Friday’s peak climbing as high as $1,952.79. U.S. gold futures also experienced a 0.2% rise, settling at $1,971.70.
In thin trading conditions due to the U.S. holiday, KCM Trade Chief Market Analyst Tim Waterer noted, “Gold is hovering under resistance at the $1,951 level.” He added that the precious metal would likely rely on Treasury yields moving lower to have a shot at surpassing $1,950 and potentially reaching greater heights this week.
Contrary to the traditional belief that gold loses its appeal as interest rates climb, the precious metal continues to gain allure. Friday’s data indicated an improvement in U.S. job growth for August, albeit accompanied by a rise in the unemployment rate to 3.8% and moderated wage gains. These factors strengthen the argument for the Fed to hit the pause button on interest rates this month, as suggested by the CME FedWatch tool, showing a 93% probability of the rates remaining unchanged in September.
Interestingly, a former vice chairman of the central bank highlighted that the full impact of the Fed’s interest rate hikes since March 2022 has not yet fully propagated to the real economy. This suggests a potentially prolonged period of economic repercussions still to come.
Meanwhile, SPDR Gold Trust, the largest gold-backed exchange-traded fund worldwide, reported a 0.10% increase in holdings on Friday, further solidifying the bullish sentiment.
In other metal markets, spot silver saw a 0.4% incline, settling at $24.27 per ounce, while platinum experienced a 0.1% rise, reaching $961.51. Palladium, on the other hand, soared 0.5%, reaching $1,224.28.