Gold has been shining to investors’ joy. Earlier this week, the yellow metal was trading near historic highs. Remarkably, gold has been rising for the fourth week in a row, largely driven by expectations of a rate cut by the Federal Reserve.
On September 15, the spot price of the precious metal grew by 0.1% to $3,645.03 per troy ounce. That is not far from the all-time high of $3,673.95 reached last week.
As a result, the precious metal gained 1.5% over the week, marking its fourth straight one-week increase. Since the beginning of this year, gold has surged 40%, fueled by buoyant demand for safe-haven assets amid US President Donald Trump’s trade policies.
Another key driver behind the gold rally is the Federal Reserve’s meeting on the key interest rate. In a widely expected move, the regulator cut the funds rate by 25 basis points, whereas some analysts were betting on a more aggressive cut of 50 basis points.
Market participants grew more confident in imminent policy easing because of significant revisions to official US employment data, which showed a cooling labor market. Besides, wage data logged tepid growth. All in all, only 22,000 new jobs were created in August, pushing the unemployment rate up to 4.3%.
The poor nonfarm payrolls overshadowed the Consumer Price Index (CPI) for August. This indicator rose by 0.4% from a month ago, while annual inflation remained at 2.9%.
However, some analysts believe the US central bank’s top priority is the weakening labor market, with other factors considered secondary.
Gold is highly sensitive to interest rate decisions, as lower rates reduce the cost of holding non-yielding assets like gold. On the flip side, this also puts downward pressure on the US dollar, which tends to lose ground as gold strengthens.
