Gold prices surged to near one-week highs on Thursday, driven by a weaker U.S. dollar and lower yields, as signs of a cooling labor market prompted investors to anticipate a significant rate cut from the Federal Reserve this month. By 12:23 p.m. ET (1623 GMT), spot gold had climbed 0.6% to $2,509.63 per ounce, having earlier risen as much as 1.1% before slightly trimming gains following the release of U.S. services sector data. U.S. gold futures also rose 0.6% to $2,540.10.
The U.S. private sector added the fewest workers in 3-1/2 years in August, potentially signaling a sharp slowdown in the labor market. This follows data released on Wednesday indicating a significant drop in U.S. job openings in July. Following the ADP data, gold prices spiked, reflecting concerns about the labor market's health, according to Phillip Streible, chief market strategist at Blue Line Futures.
Traders now see a 61% chance of a 25-basis-point rate cut by the U.S. central bank this month, with a 39% chance of a 50-bps cut, according to the CME FedWatch tool. San Francisco Fed President Mary Daly emphasized that the Fed needs to cut interest rates to maintain a healthy labor market, with the extent of the cuts dependent on incoming economic data.
Attention now shifts to the upcoming non-farm payrolls (NFP) report on Friday. If the August unemployment rate matches July's 4.3%, the highest since 2021, it could push gold prices back towards their record high as markets bet on a larger rate cut. Meanwhile, spot silver gained 1.7% to $28.78, platinum rose 3% to $930.70, and palladium increased 1% to $943.00.
