Gold rebounds as softer data trims Fed tightening risk

Gold gathered momentum into the end of the week, climbing toward $4,200 an ounce and snapping a run of four consecutive weekly declines. The trigger was the soft June payrolls report, which prompted traders to scale back expectations for Federal Reserve rate hikes. Lower rate expectations reduce the opportunity cost of holding non-yielding assets like gold, and a weaker dollar added further support.

The metal also drew help from the recent slide in oil prices and easing inflation concerns as shipping through the Strait of Hormuz continued to recover. On the demand side, central banks remained buyers, adding a net 41 tonnes to reserves in May according to World Gold Council data, while Chinese buying showed modest improvement even as higher prices softened Indian demand.

The backdrop is not uniformly bullish. J.P. Morgan has noted that investor interest cooled recently, describing gold as caught in a technical no-man's land, and flagged the main downside risk as a scenario where US growth stays firm but inflation keeps accelerating, emboldening the Fed to hike. For now, the near-term direction hinges heavily on incoming US inflation data and the Fed's July decision.