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Gold prices rose in Asian trading on Friday, recovering slightly from a steep drop in the previous session. The yellow metal remained supported by cautious sentiment as markets awaited an important address by Federal Reserve Chair Jerome Powell later in the day, which is expected to provide more clarity on the Fed’s monetary policy direction.
Gold’s Rally and Recent Pullback
Earlier this week, gold surged to record highs, fueled by growing market conviction that the Federal Reserve is poised to begin cutting interest rates as early as September. Despite a subsequent retreat in prices due to profit-taking, gold has maintained its appeal as a relatively strong investment option.
As of 01:24 ET (05:24 GMT), spot gold was up 0.4%, trading at $2,495.52 an ounce. Meanwhile, gold futures for December delivery rose 0.6% to $2,530.70 an ounce. Despite the recent rise, spot prices have dipped slightly this week after reaching an all-time high of $2,531.72 an ounce.
Market Focus on Powell’s Speech
The key event on traders’ radar is Powell’s speech at the Jackson Hole Symposium scheduled for later on Friday. Market participants are keen to decipher any hints about the Fed’s intentions regarding interest rate cuts.
Current market sentiment largely anticipates a rate cut in September, although there is some division among traders about the magnitude of the reduction. According to CME Fedwatch, the market is split between expectations of a 25 basis point and a 50 basis point cut.
Economic Data Fuels Rate Cut Expectations
The speculation over a more significant rate cut was bolstered by disappointing labor market data released earlier in the week. A sharp downward revision in payrolls data for the year through March 2024 revealed that the labor market may be weaker than previously believed, intensifying concerns about a potential slowdown in the U.S. economy.
Gold’s Safe-Haven Appeal
The prospect of slower economic growth and lower interest rates enhances gold’s attractiveness as a safe-haven asset. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, which is why the metal often performs well in such environments.
As markets brace for Powell’s comments, gold’s performance will likely remain sensitive to any indications of the Fed’s future policy moves, particularly regarding interest rates. The metal’s safe-haven status continues to provide support, even amid fluctuations driven by profit-taking and shifts in market expectations.
