Gold Hits Two-Month High as U.S. Employment Data Fuels Rate Cut Expectations

International gold prices rebounded 11% from their June lows to reclaim the $4,400 per ounce mark, hitting their highest level in about two months, as slowing U.S. employment and consumer price inflation bolster expectations for a Federal Reserve rate cut.

U.S. nonfarm payrolls for July fell by 23,000, defying market expectations. Consequently, the probability of a September rate freeze, based on the CME FedWatch Tool, rose to 50.1%, up 19.7 percentage points from a month ago (30.4%). The July Consumer Price Index (CPI) rose 3.4% year-on-year, down 0.1 percentage points from June (3.5%).

According to the World Gold Council (WGC), global central banks' net gold purchases in the second quarter reached 288.9 tons, a 62% increase from the same period last year. The People's Bank of China recorded net purchases for the 20th consecutive month, with July net purchases totaling 640,000 troy ounces. The Bank of Korea expanded its gold exposure for the first time in 13 years by purchasing overseas-listed physical gold ETFs in the second quarter.

The four domestically listed gold-themed ETFs posted an average return of 6.9% over the past week. In contrast, gold bar sales by the nation's five major banks last month totaled 33.3 billion won, down 78.5% from October of last year (155.2 billion won). The combined balance of gold banking services at KB Kookmin, Shinhan, and Woori Banks also fell 29.8%, from 2.4434 trillion won at the end of January to 1.7159 trillion won at the end of July.