Gold prices kicked off the new trading week with a significant decline, following a strong surge on Friday after weaker-than-expected US jobs data. Analysts believe that the short-term outlook for gold prices is improving, and the precious metal could soon reclaim the $3,400/oz mark.
As of 8:05 a.m. Vietnam time (August 4), gold spot prices in Asian markets dropped by $9.8/oz compared to the previous week’s close in New York, equivalent to a nearly 0.3% decrease, trading at $3,353.7/oz according to Kitco Exchange data. Converted at Vietcombank’s selling rate, this price is equivalent to approximately VND 106.6 million per tael.
At the same time, Vietcombank quoted the USD at VND 26,000/USD (buying) and VND 26,390 (selling).
On Friday, gold prices surged by about 2.2% after the US Department of Labor released disappointing July jobs data, which heightened expectations of an interest rate cut by the Federal Reserve in September and caused the US dollar to tumble.
In the futures market, the probability of a Fed rate cut at the upcoming meeting rose to around 90%, after dipping below 50% following the Fed’s meeting on Wednesday, as indicated by the FedWatch Tool from CME Group. The Dollar Index, which measures the greenback’s strength against a basket of six major currencies, fell by approximately 1.3% on Friday.
This Monday, the Dollar Index extended its losses, slipping by nearly 0.3% from last week’s close, falling below 98.9 points.
In an interview with Kitco News, portfolio manager Jamie Cox of Harris Financial Group, suggested that the Fed might regret their decision to keep rates unchanged last week. “It’s likely that the Fed will have to cut rates in September, and they may even reduce by 0.5 percentage points to make up for their recent inaction,” said Cox.
A rate cut by the Fed would benefit gold prices, as it is a non-interest-bearing asset. The Fed’s maintenance of interest rates since the beginning of the year, despite calls from President Donald Trump for reductions, has put downward pressure on gold. The prospect of lower interest rates also weakens the US dollar, which is another positive factor for gold prices since gold is priced in US dollars.
Aaron Hill, an analyst at FP Markets, shared a similar view, stating that the weak jobs report has altered the short-term outlook for gold, which had previously been rather gloomy.
“Weaker-than-expected employment data undermines confidence in the US economy, puts downward pressure on the US dollar, and leads the market to anticipate a more dovish stance from the Fed, possibly leaning towards an interest rate cut to stimulate growth. For gold, the disappointing labor data reinforces its role as a hedge against economic uncertainty. Gold prices surged as investors sought the safety of this safe-haven asset,” explained Hill.
According to Naeem Aslam, an investment director at Zaye Capital Markets, with the significant shift in rate expectations, gold has the potential to embark on a solid upward trend towards $3,400/oz.
“If the Fed signals a more accommodative stance, speculative capital could push gold prices beyond the psychological level of $3,400/oz, especially as investors seek safe-haven assets amid economic turmoil… We believe that traders have positioned themselves for a gold price recovery in the fall,” Aslam stated.
Gold’s all-time high was above $3,500/oz, reached in April of this year when President Donald Trump’s trade war was at its peak.
The Greenback Surges.
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