Gold prices extended their advance on Friday, supported by expectations of United States Federal Reserve interest rate cuts and persistent trade-related uncertainties, which helped fuel demand for the safe-haven asset.
By 4:11PM AEST (6:11 am GMT), spot gold was trading $7.32 or 0.2% higher at US$3,553.33 per ounce, having bounced overnight from the $3,500/oz psychological threshold.
For the week, the metal is on track for weekly gains of more than 3%, holding close to record levels.
Markets are increasingly confident that the Fed will deliver at least two 25-basis-point rate cuts before the end of the year, with the CME Group FedWatch Tool indicating a virtual certainty of a 25bp cut at the next Fed meeting.
That outlook has kept U.S. dollar strength in check and continues to underpin demand for the non-yielding yellow metal.
The World Gold Council says ETF investors are showing the strongest sensitivity to stagflation risks among all investor segments.
"ETF investors are the most sensitive to expectations of stagflation – statistically, significantly so," the WGC said in its August note, as North American funds dominated inflows with US$4.1 billion.
“Western investors are increasingly taking control of gold's price direction as emerging market demand cools, potentially re-establishing the traditional relationship between gold and US real interest rates.”
Trade-related uncertainties have added to gold’s appeal, although the generally positive tone across equity markets could limit near-term gains, particularly as gold remains overbought on short-term technical charts.
Investors now turn focus towards the release of U.S. nonfarm payrolls data later in Friday's session, which could provide further clarity on the Fed’s policy trajectory. Markets are expecting an addition of 65,000 jobs.
