Gold Gains Ground on Slower US Job Growth and Services Contraction

Gold surged to approximately $2,360 per ounce on Thursday, nearing its highest levels in four weeks following new US economic data that strengthened expectations of Federal Reserve interest rate cuts. In June, US services activity unexpectedly contracted sharply, marking its steepest decline in four years and suggesting decreased inflationary pressures. Furthermore, continuing jobless claims extended their nine-week increase streak, while private payrolls in June expanded at a slower pace. Federal Reserve officials acknowledged a slowing US economy during their June meeting but advocated for a cautious approach to rate cuts, according to the latest FOMC minutes. Additionally, heightened tensions in the Middle East, sparked by reports of Israel's targeting of a senior Hezbollah commander and subsequent retaliatory actions by Hezbollah near the border, spurred safe-haven demand for the precious metal.

On Thursday, the dollar index stabilized around 105.3 after reaching a three-week low in the previous session, pressured by lackluster US economic data that heightened expectations for Federal Reserve interest rate cuts this year. Data released Wednesday revealed an unexpected contraction in US services activity for June, coupled with weaker private employment growth, signaling a decelerating economy. Meanwhile, minutes from the Fed’s June policy meeting indicated a divergence among members regarding the duration of maintaining the terminal rate, while emphasizing a cautious stance on rate cuts. Investors are now focused on Friday’s nonfarm payrolls report for further insights into the labor market. Currently, markets are pricing in approximately a 68% probability of a Fed rate cut in September, a notable increase from around 56% just a week ago. The dollar softened broadly but remained near 38-year highs against the yen.