Gold Prices Set for Second Weekly Gain Amid Economic Slowdown and Rate Cut Speculation

Gold prices are on track for a second consecutive weekly gain, despite a late rebound in the US Dollar, as investors anticipate a potential rate cut by the US Federal Reserve in September.

Data released Thursday indicated a slowing US economy, with Initial Jobless Claims falling by 5,000 to a seasonally adjusted 238,000 for the week ended June 15, down from a ten-month high. Additionally, Housing Starts dropped 5.5% to an annual rate of 1.277 million units, the lowest since June 2020, and below the expected 1.37 million units.

Cooling US labor and housing markets keep hopes for a September Fed rate cut alive, benefiting non-interest-bearing gold.

Furthermore, the Swiss National Bank's rate reduction for the second consecutive meeting on Thursday, following rate cuts by the Bank of Canada and the European Central Bank, supports the narrative of an era of lower borrowing costs, helping gold prices amid geopolitical tensions.

Gold attracts buyers as investors remain cautious following a meeting between Russia’s President Vladimir Putin and North Korean leader Kim Jong Un, and ongoing Middle East tensions. Gold remains the ultimate traditional safe-haven asset.

Increased gold demand from India, the world’s second-largest gold consumer, also boosts prices. Gold buying exceeded expectations leading up to the Akshaya Tritiya festival, which took place on May 10. The World Gold Council noted that buying was surprisingly strong despite prices being 23 percent higher than during the 2023 festival.

All eyes are now on the Eurozone and US preliminary S&P Global Manufacturing and Services PMI data, which could provide further insight into global economic prospects, impacting risk sentiment and the US Dollar’s performance against major currencies. This could affect gold price action, as end-of-week flows and repositioning ahead of next week’s US Core Personal Consumption Expenditure (PCE) Price Index will dominate financial markets later on Friday.