Gold experienced a significant 1% surge on Friday, thanks in part to a weaker dollar and a surge in safe-haven purchases. The catalyst for this uptick in demand? The United Auto Workers union initiated strikes at three major automakers in Detroit. Additionally, optimism regarding a possible halt in U.S. interest-rate hikes provided further reinforcement for the precious metal.
At the close of the day, spot gold had climbed 0.9% to reach $1,927.79 per ounce, marking a 0.6% increase for the week. U.S. gold futures also saw gains, rising by 0.9% to hit $1,949.70.
The U.S. dollar weakened by 0.3% against its competitors earlier in the day, effectively lowering the cost of gold for holders of other currencies.
Offering insights into the situation, Tai Wong, an independent metals trader based in New York, remarked, “Gold and silver are rallying as a response to the prevailing concerns.”
The United Auto Workers union orchestrated simultaneous strikes at three plants belonging to the “Detroit Three,” which includes Stellantis, the parent company of Chrysler. This action is considered one of the most ambitious labor movements within the U.S. industrial sector in many years.
Wong further elaborated, “The UAW strike appears likely to be protracted, given the union’s demands. Additionally, the impending government shutdown at the end of the month is garnering increased attention.”
Gold, renowned for its role as a safe haven in times of political and financial instability, gained further appeal in this environment.
Market participants are now eagerly anticipating greater clarity on the U.S. Federal Reserve’s interest rate stance, with their policy meeting scheduled for next week. The widespread expectation is that the central bank will maintain the status quo and refrain from adjusting interest rates. Jim Wyckoff, a senior market analyst at Kitco, noted, “Should the Fed adopt a more dovish stance next week, it could have a substantial impact and trigger a rally in the gold market.”
Meanwhile, China saw a notable surge in physical gold premiums throughout the week, driven by strong demand to support the depreciating yuan and a shortage of fresh import quotas.