Gold Price Hits One-year High After Weak US Jobs Data

The yellow metal has been on an uptrend since the beginning of the month, and has surged more than 2 percent in the past week.

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Gold’s rally continued on Thursday (September 7) as weak US jobs data pushed the dollar down, supporting the yellow metal.

Early in the day, gold climbed to $1,346.61 per ounce, its highest level since September 2016. The precious metal has been on an uptrend since the beginning of the month, and has surged more than 2 percent in the past week.

Thursday’s weak jobs data has raised investors’ expectations that the US Federal Reserve may delay an interest rate increase in the short term. The odds of another rate increase by the end of the year have slipped to about 29 percent from 40 percent a month earlier, according to Bloomberg.

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“The weaker U.S. economic data pushed the odds for a rate hike to ground. Clearly the Fed cannot be comfortable with weaker job market and the fact is that worse is still yet to come,” Naeem Aslam, chief market analyst at Think Markets, told Reuters

The Fed will meet on September 19 to decide whether it will raise interest rates again this year. In general, higher interest rates tend to boost the dollar and negatively impact gold.

“I expect some downward pressure on gold starting next week and a rebound in the dollar short-term,” said Samson Li, an analyst with Thomson Reuters-owned metals consultancy GFMS.

Geopolitical tensions between the US and North Korea have also supported prices this week. Concerned investors are turning to safe-haven assets, boosting gold demand.

“Geopolitical tensions remain elevated surrounding North Korea, so I’d expect that would keep gold pretty well supported in the short term and in the week ahead,” said Jonathan Butler, commodities analyst at Mitsubishi (TSE:8058) in London.

The gold price has been trading above the $1,300 mark recently, and many market participants believe the yellow metal could hit $1,400.

“There is a combination of events driving gold higher, including both political uncertainty and hedge fund buying. If these extreme political circumstances continue it could drive the price to $1,400,” Nizam Hamid, ETF strategist at WisdomTree, said in a press comment on Thursday.

Similarly, Francisco Blanch, head of commodities research at the Bank of America Merrill Lynch, recently said that gold is on track to reach $1,400 by early next year. Lower long-term US interest rates and US President Donald Trump’s lack of progress in delivering reforms will provide support.

However, Julius Baer (VTX:BAER) analyst Carsten Menke warns that downside risks remain if the dollar rebounds. “Given the solid growth backdrop in the United States and the outlook for higher interest rates, we still expect a rebound of the U.S. dollar,” he told CNBC.

He continued, “[a]dding prevailing bullish sentiment in the futures market as well as sluggish demand in the physical market, we see more downside than upside from current levels and shift our view to cautious.” 

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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