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Gold prices experienced a dip on Friday as the US dollar, often referred to as the Greenback, regained some of its strength and US Treasury bond yields rebounded following the release of a closely-watched US employment report. At the time of writing, the price of gold, represented by the XAU/USD pair, stood at $2,907, reflecting a modest decline of 0.11%.
The drop in gold prices coincided with the release of the February Nonfarm Payrolls (NFP) report by the US Bureau of Labor Statistics (BLS). While the report revealed that the US economy managed to add more jobs than it did in January, it still fell short of expectations. Despite this, the Unemployment Rate remained steady, aligning with familiar levels. Federal Reserve Governor Adriana Kugler commented on the findings, noting that hiring activity continues to surpass the breakeven level, underscoring the resilience of the labor market. These developments in the US labor market have contributed to the fluctuations in gold prices and other financial indicators.
This week witnessed a significant upswing in gold prices, nearing record highs established in February, spurred by ongoing geopolitical uncertainties. As of Friday evening, the price of gold per ounce reached $2,929.25, a considerable increase from $2,857.83 just a week prior. This upward trend reflects the growing demand and market dynamics amid global unrest.
Similarly, copper prices experienced a notable surge this week on the London Metal Exchange (LME). The anticipation of forthcoming tariffs led to a rush among market participants to secure copper. By Friday, a ton of copper on the LME was valued at $9,682, compared to $9,559 the previous week. In the U.S., fears of impending import taxes led buyers to stockpile copper reserves. This behavior pushed prices up, with the Comex in New York reporting a significant weekly rise of over 5%, outpacing the approximately 3% increase seen on the LME.
Conversely, cocoa prices have faced a decline this week following forecasts from the International Cocoa Organization (ICCO) predicting increased supply for the 2024/2025 season. In London, a ton of cocoa slated for May delivery dropped to £6,634, down from £7,342 the previous week. A similar downward trend was observed in New York, where prices fell from $9,124 to $8,461—marking the lowest levels since November of the previous year.
Amid these market shifts, gold’s enduring appeal remains evident, bolstered by rising physical demand. Despite ongoing efforts to suppress gold prices through synthetic strategies, demand for physical gold continues to underpin its value. Gold maintained levels above $2,900 in most recent price fixes, underscoring the influence of physical buyers over speculative trading activity. Silver, too, has demonstrated strong demand, with resistance levels proving increasingly difficult to maintain.
Central banks and institutional investors are reshaping the market through accelerated acquisitions of gold. Premiums for immediate delivery reached as high as $38 per ounce in February, reflecting a rush to secure physical assets. Additionally, the declining open interest in COMEX contracts signifies a notable shift as bullion banks pivot from covering short positions to meeting delivery obligations.
The upcoming Basel III compliance deadline is also driving transformations in gold markets. The reclassification of gold as a Tier 1 asset is fostering a preference for physically backed holdings, curtailing speculative volatility and solidifying gold’s status as a reliable safe-haven investment.
Furthermore, the resurgence of gold-buying activity in China is anticipated to amplify its upward momentum. Although recent data has yet to capture this trend, its impact is expected to add to the growing pressure on short sellers, reinforcing a positive long-term outlook for gold.
Globally, gold’s increasing integration into international trade highlights a broader movement toward de-dollarization. Reports of barter agreements involving gold, circumventing traditional financial networks, reflect a shift away from established monetary structures.
As the prominence of physical gold accumulations rises and futures open interest continues to decline, traditional price manipulation tactics are becoming less effective. This evolving dynamic strengthens gold’s position as a strategic asset, ensuring its significance in the rapidly changing financial landscape.
