Key Takeaways:
Sluggish U.S. job growth increases market expectations of Fed rate cuts.
Analysts at Mitsubishi UFJ say this benefits non-yielding assets like gold.
Gold may see short-term support as traders seek safe-haven amid uncertainty.
Gold prices could benefit in the short term as a weaker-than-expected U.S. labor market raises the probability of interest rate cuts by the Federal Reserve, according to analysts at Mitsubishi UFJ Financial Group (MUFG).
The comments follow Friday’s disappointing non-farm payrolls data, which showed the U.S. added only 73,000 jobs in July, far below estimates. The weak print has triggered a market repricing of monetary policy expectations, with the probability of a September Fed rate cut rising above 80%, according to CME FedWatch data.
“This is good news for interest-free gold,” MUFG analysts said, citing growing demand for safe-haven assets as economic uncertainty builds.
Gold Gains as Fed Outlook Shifts
Lower interest rates reduce the opportunity cost of holding gold, a non-yielding asset. As rate cut expectations intensify, gold often attracts capital from investors looking to hedge against market volatility and economic downturns.
MUFG expects strong support for gold prices in the near term, especially if macro indicators continue to show signs of cooling, and geopolitical tensions persist.