The price of gold rose slightly, supported by the weakening of the US currency and ongoing tensions in the Middle East. At the same time, investors are being cautious ahead of the publication of US labor market data, which will help clarify the current state of the economy, and possibly ease recession fears.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.17% to 103.02. Meanwhile, the yield on 10-year US bonds fell by 5.7 basis points to 3.911%, making non-yielding bullion more attractive.
As for the data, the weekly report on initial jobless claims will be published at 12:30 GMT. Economists expect that in the week to August 3, initial jobless claims fell to 240 thousand from 249 thousand a week earlier (an almost new yearly high). The latest US data pointed to a slowdown in the economy and reinforced expectations that the Fed could cut the interest rate by 0.5% at the September meeting. According to the CME FedWatch Tool, markets see a 72.0% probability of a 0.5% rate cut in September, and a 53.6% probability of 0.25% rate cut in November. Overall, futures impose 105 basis points of cuts this year. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Overall, long-term fundamentals, including geopolitical tensions in the Middle East and falling U.S. Treasury yields, look favorable for gold. Experts said there are still concerns about the expansion of the conflict in the Middle East after the assassination of a Hamas leader in Tehran last week.