Gold price surges to a 7-week high

Gold has surged this week and is now trading near its highest level in seven weeks. But what is driving the rally?

Why is the gold price rising?

Gold has climbed sharply throughout the week and reached around $4,300 per ounce on Thursday – its highest level in seven weeks. The upward move continued on Friday morning, when the gold price in Swedish kronor reached as high as SEK 1,313 per gram.

Several factors have contributed to the strong performance:

• easing concerns over further increases in oil prices
• lower expectations of additional US interest rate hikes
• weaker US labour market data
• pressure on the US dollar
• continued geopolitical uncertainty

Hopes that shipping through the Strait of Hormuz may resume have pushed oil prices lower and reduced inflation concerns. This has also led markets to price in fewer interest rate hikes from the US Federal Reserve.

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Weak jobs data supports gold

The US private sector added just 44,000 jobs in July. This was well below market expectations of 70,000 and marked the weakest reading since January.

Weaker labour market data may reduce the need for higher interest rates. This tends to support gold, as the precious metal becomes more attractive when returns on interest-bearing assets decline.

At the same time, conditions can change quickly. The market is now focused on upcoming US labour market data and developments surrounding the Strait of Hormuz, both of which could trigger further moves in the gold price.

Demand for investment gold is growing

Physical demand is also providing support to the market. In China, consumption of gold bars and gold coins increased by more than 28% during the first six months of the year.

At the same time, China’s central bank purchased more than 40 tonnes of gold and increased the country’s gold reserves for the twentieth consecutive month.

This week’s sharp rise in the gold price shows how quickly conditions in the market can change. For long-term savers, gold is therefore rarely about finding the perfect day to buy – but rather about owning a physical asset when uncertainty increases.

The gold price has already made significant gains this week. Looking to strengthen your savings with physical gold? At Tavex, you can find gold bars and gold coins for both new and experienced investors.