Gold prices rose during Friday's Asian session, holding near weekly highs and putting the precious metal on track to end a four-week losing streak as weaker-than-expected United States employment data reduced expectations of further Federal Reserve interest rate increases.
By 3:45 pm AEST (5:45 am GMT), spot gold was trading 1.3% higher at US$4,175.20 an ounce.
The gains came as the U.S. dollar weakened as data released on Thursday showed U.S. nonfarm payrolls increased by just 57,000 jobs in June, well below market expectations for a gain of 110,000.
The labour force participation rate also fell to 61.5%, its lowest level in more than five years, reinforcing concerns that conditions in the U.S. labour market are weakening.
The softer employment figures prompted investors to reduce expectations that the Federal Reserve will raise interest rates in the near term.
According to the CME Group FedWatch Tool, markets are now pricing in roughly a 53.2% chance of a September rate hike, down from around 64.1% before the jobs report.
Analysts at ANZ said the weaker labour market data had boosted investor demand for gold by easing concerns over tighter monetary policy.
“Gold rallied as weak U.S. job numbers eased fears of imminent rate hike. The price was up by more than 2.8% following the release of the report that showed U.S. hiring slowed sharply in June.
"This should ease pressure on the Fed to hike rates at the its next meeting in July. The data also triggered a selloff in the USD and sent bond yields lower, all supporting investor demand for gold.”
The U.S. dollar was also pressured following recent comments from Federal Reserve Chair Kevin Warsh, who struck a less hawkish tone during an appearance at the European Central Bank Forum in Sintra on Wednesday.
Warsh said he had been encouraged by the recent easing in inflation expectations, further supporting expectations that the central bank may have less urgency to tighten monetary policy.
Additional pressure on the greenback came from continued weakness in the USD/JPY exchange rate as traders remained alert to the possibility of intervention by Japanese authorities to support the yen.
