Gold advances as markets await crucial U.S. payrolls report

Investors position ahead of employment figures

Gold prices traded higher on Thursday as market participants prepared for the release of the U.S. non-farm payrolls report, a key economic indicator that could influence the Federal Reserve’s interest rate outlook.

By 10:37 GMT, spot gold had gained 0.8% to $4,065.05 per ounce, while gold futures edged 0.1% lower to $4,077.42 per ounce.

Strong jobs data could reinforce Fed expectations

Economists expect the U.S. economy to have added 114,000 jobs in June, down from 172,000 in May, with the unemployment rate forecast to remain unchanged at 4.3%.

The labour market has consistently surprised to the upside in recent months, with non-farm payrolls exceeding forecasts for three consecutive reports and lifting the three-month average to 188,000 jobs.

“Our forecast suggests a solid job market, reconfirming that the labor market has reaccelerated from its last year’s soft patch,” Morgan Stanley analysts said.

Rate outlook remains the key driver

A resilient labour market could give the Federal Reserve additional scope to raise interest rates if inflationary pressures persist.

Although oil prices have eased since the framework peace agreement between the United States and Iran, policymakers continue to monitor whether earlier energy price increases will have a lasting impact on inflation.

Deutsche Bank said a “hawkish repricing” of Federal Reserve expectations has developed in recent weeks, with CME FedWatch indicating investors now see the possibility of another rate increase as early as September.

Those expectations eased somewhat after weaker-than-anticipated private payrolls data and comments from Federal Reserve Chair Kevin Warsh suggesting inflation risks have moderated.

Dollar remains supportive despite modest pullback

The outlook for monetary policy continues to influence the gold market because higher interest rates reduce the appeal of non-yielding assets.

While the U.S. dollar index weakened slightly on Thursday, it remained well above pre-conflict levels, limiting upside for bullion.

“The firmer currency backdrop […] is prompting investors to reassess positioning after a volatile few weeks,” said Neil Welsh, Head of Metals at Britannia Global Markets.