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Gold prices continued their run-up to record highs nearing $2,200/oz, sparked by expectations of lower U.S. interest rates and persistent demand from Chinese households, and gold bugs may have reason to look for $2,500 before the end of the year.
Gold powered to an all-time high of $2,185.19/oz on Friday after the U.S. reported a much higher than expected 275K jobs created in February but an uptick in the unemployment rate and a moderation in wage gains, reinforcing hopes that inflation has cooled enough to allow the Fed to start cutting rates later this year.
The dollar index edged lower, making gold cheaper for overseas buyers, while the 10-year U.S. Treasury yield fell 9 basis points on the week to 4.09%, its lowest in five weeks.
The jobs report “will be seen as one that keeps the Fed on course for June,” metals trader Tai Wong told Reuters, and “gold prices will continue to trend higher overall, though a short consolidation may be necessary.”
Front-month Comex gold (XAUUSD:CUR) for March delivery closed +0.9% on Friday to $2,178.60/oz, another record settlement and its seventh straight daily gain; for the week, the front-month contract climbed 4.4%.
Front-month March Comex silver (XAGUSD:CUR) finished -0.1% on Friday but jumped 5.1% this week to $24.339/oz.
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The world’s central banks remain net accumulators, with the Peoples Bank of China added gold to its reserves for a 16th straight month in February.
Bullion held by the PBOC rose by ~390K troy ounces last month, according to official data, lifting total holdings to 72.58M oz, equivalent to ~2,257 tons.
Buyers in the Chinese domestic market also have been showing strong demand for gold, undeterred by high prices, as concerns over the country’s weak economic recovery prompt a flight to safe-haven assets.
“There are number of central banks buying a combined total of ~1,000 tons a year, and that sends a message to the wider market” about possible long-term changes to the global monetary system, StoneX Financial analyst Rhona O’Connell told Bloomberg.
Yet gold-backed ETFs recorded another month of outflows in February, extending their losing streak to nine months, with North America holdings dipping to four-year lows.