Stability of Gold Prices After Increased Bets on U.S. Rate Cuts

SadaNews - The price of gold traded near its record high reached on Friday, supported by unexpectedly weak U.S. jobs report that prompted traders to increase bets on a Federal Reserve interest rate cut.

The precious metal reached a level approximately $20 lower than its recent peak near $3,600 an ounce, after rising by as much as 1.5% late on Friday. The main job report showed a slowdown in employment, while unemployment rose to its highest level since 2021.

This bolstered traders' bets in swap contracts for rate cuts, with expectations for about three additional cuts for the remainder of this year. Lower borrowing costs tend to increase the attractiveness of non-yielding gold, which also received support from strong demand for safe havens amid concerns about the future of the U.S. central bank.

This week, expectations for rate cuts will be tested through revisions of U.S. job data set to be released on Tuesday, in addition to consumer and producer inflation data scheduled for Wednesday and Thursday. Traders will also monitor how the market absorbs U.S. Treasury auctions for 3, 10, and 30-year maturities.

Gold and Silver Prices Double

The prices of gold and silver have more than doubled over the past three years, as geopolitical, economic, and trade risks have heightened globally, boosting demand for safe havens. U.S. President Donald Trump's attacks on the Federal Reserve have intensified fears regarding its independence, as he pledged to secure "the majority, very soon" in the central bank and cut rates.

Investors are awaiting a historic ruling on whether Trump has legal grounds to dismiss Federal Reserve Board member Lisa Cook, potentially allowing him to appoint an official inclined towards easing monetary policy. Goldman Sachs Group Inc. stated last week that gold could soar to nearly $5,000 an ounce if the independence of the central bank is threatened and investors shift a small portion of their Treasury holdings to gold.

Exempting Gold Bars from Tariffs

The Trump administration also moved on Friday to exempt gold bars and certain metals from tariffs imposed based on exporting countries. This measure formalizes a plan to exempt gold bars from tariffs following a decision from U.S. Customs and Border Protection weeks ago that shocked traders and led to confusion, as it suggested that the bars would be subjected to import taxes.

Data published over the weekend showed that the People's Bank of China increased its gold reserves in August for the tenth consecutive month in an ongoing effort to diversify its reserves away from the U.S. dollar.

Spot gold prices fell by 0.1% to $3,582.03 an ounce by 12:16 PM Singapore time. The Bloomberg Dollar Spot Index rose by 0.1%. Silver prices decreased, while palladium rose slightly, and platinum remained relatively unchanged.