Gold is holding its ground again, but this is not the same rally that carried bullion through the early part of the year. The latest move is being driven less by panic and more by repricing.
A softer US labour-market reading has reduced fears that the Federal Reserve will rush into another rate increase, giving non-yielding assets some breathing space.
Yet the dollar has not rolled over, and that is keeping gold’s rebound measured rather than explosive.
Rate relief steadies bullion
Spot gold was little changed near $4,174.66 an ounce in Asian trade on Monday, after earlier touching its highest level since June 22.
US gold futures for August delivery rose 1.5% to $4,186.70.
The metal is coming off a weekly gain of more than 2%, its first advance in five weeks.
The turn followed signs that hiring in the US economy is slowing, which encouraged traders to scale back expectations for a near-term Fed hike.
That matters because gold pays no interest. When markets price in higher rates, the opportunity cost of holding bullion rises.
When those expectations soften, gold usually gets a cushion.
Dollar strength limits the upside
The rally still has a ceiling. The dollar gained about 0.1%, making gold more expensive for buyers using other currencies.
Market strategists see that as the main reason bullion has not been able to extend last week’s rebound more forcefully.
Rate markets now imply about a 55% chance of a September Fed increase, down from above 60% before the latest labour-market figures.
That shift is supportive for gold, but it is not a full rejection of the Fed tightening story.
Investors will now turn to the minutes of the Fed’s June 16-17 meeting, due Wednesday.
The release should show how strongly policymakers debated the need for further tightening before the recent pullback in oil prices and softer jobs data changed the market mood.
Demand outlook keeps forecasts cautious
JPMorgan has also cooled some of the more aggressive expectations around bullion.
The bank expects gold to average about $4,300 an ounce in the third quarter and $4,500 in the fourth, citing weaker-than-expected demand from key buying sectors and renewed sensitivity to real yields.
That still points to upside from current levels, but it is not a runaway forecast.
The bank also sees downside risks if incoming US data revives the case for earlier Fed action.
Other precious metals were softer after recent gains. Silver slipped 0.6% to $62.03 an ounce after earlier touching its highest level since June 23.
Platinum lost 0.1% to $1,636.60, while palladium eased 0.2% to $1,271.75.
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