Gold Prices Surge as Unemployment Figures Spark Rate Cut Expectations

Stock Market09/05/2024

AI Generated Image: Bull and Bear watching XAUUSD Graph

The price of gold rose by 1% on Thursday following new data from the Department of Labor indicating a higher-than-expected increase in new claims for unemployment benefits last week, reinforcing bets that the Federal Reserve will cut interest rates later this year.

Spot gold surged by 0.9% to $2,329.79 per ounce at 1658 GMT. US gold futures for delivery in June rose by 0.63% to $2,336.80 per ounce.
The US Dollar Index (DXY) dropped by 0.22% to 105.312.
Initial claims for state unemployment benefits rose by 22,000 to a seasonally adjusted figure of 231,000 in the week ended May 4, the Department of Labor reported on Thursday, compared to the 215,000 claims forecasted by economists surveyed by Reuters.
The dollar (DXY) weakened against its rivals post-employment report, making gold cheaper for holders of other currencies.
"What we are seeing is a continued impact of expectations for Fed rate cuts, or when those cuts may occur," said David Meger, director of alternative investments and trading at High Ridge Futures.
The latest data indicates a slight weakening in the labor market, bolstering expectations that Federal Reserve interest rate cuts may happen sooner than anticipated, supporting markets like gold and silver, he added.
Lower interest rates reduce the opportunity cost of holding bullion, which doesn't yield interest. According to the CME's FedWatch tool, traders currently estimate a 67% chance of the Federal Reserve cutting rates in September.
Spot silver surged by 2.8% to $28.10 per ounce, spot platinum advanced by nearly 1.1% to $982.55 per ounce, and spot palladium gained 1.7% to $968.00 per ounce.