Gold prices continued their upward momentum on Thursday, climbing to a seven-week high as investors reassessed the outlook for U.S. monetary policy ahead of the closely watched non-farm payrolls report. Softer expectations for additional Federal Reserve interest rate increases, combined with persistent geopolitical uncertainty in the Middle East, reinforced demand for the precious metal as a defensive asset.

The latest rally reflects shifting investor sentiment after gold recorded its strongest single-day advance since February, underscoring how expectations surrounding interest rates and geopolitical developments continue to shape global commodity markets.

Fed Expectations Fuel Gold’s Latest Rally

Spot gold rose 0.4% to $4,261.98 per ounce, after earlier touching its highest level since June 18. The advance follows a gain of more than 4% on Wednesday, marking the largest daily increase for the metal since February.

Market participants have moderated expectations for additional Federal Reserve tightening. According to the CME FedWatch Tool, markets currently assign approximately a 57% probability that the Federal Reserve will raise interest rates in September. Lower expectations for higher borrowing costs typically support gold because the metal does not generate interest income, making it relatively more attractive when yields stabilize or decline.

Treasury yields have also eased in recent sessions, further strengthening investor appetite for precious metals as portfolio diversification tools during periods of macroeconomic uncertainty.

Payroll Data Becomes the Next Market Catalyst

Attention has now shifted to Friday’s U.S. non-farm payrolls report, one of the most influential economic releases for financial markets. Employment data will provide investors with fresh insight into the strength of the U.S. labor market and could materially influence expectations for future Federal Reserve policy decisions.

A stronger-than-expected employment report could reinforce arguments for maintaining tighter monetary policy, potentially supporting the U.S. dollar and Treasury yields. Conversely, softer labor market data may strengthen expectations that the Federal Reserve can adopt a less aggressive policy stance, providing additional support for gold prices.

For investors, the payroll report remains a critical short-term event capable of driving volatility across commodities, currencies, bonds, and equity markets.

Geopolitical Risks Continue Supporting Safe-Haven Demand

Beyond monetary policy, geopolitical developments remain an important factor supporting the gold market. Although hopes have emerged for progress toward reopening the Strait of Hormuz, tensions remain elevated after Iran warned Gulf states that future U.S. military strikes could trigger broader regional retaliation.

Such uncertainty continues to sustain demand for traditional safe-haven assets even as oil markets attempt to price in the possibility of improving shipping conditions in the Middle East. Gold has historically benefited during periods of geopolitical instability as investors seek assets perceived as preserving value during market stress.

For Israeli and international investors, the combination of evolving central bank expectations and geopolitical uncertainty reinforces gold’s role within broader portfolio risk management strategies. Price movements over the coming sessions are likely to remain highly sensitive to both macroeconomic releases and developments across the Middle East.

Looking ahead, investors will closely monitor Friday’s employment report, subsequent Federal Reserve commentary, Treasury yield movements, and geopolitical developments surrounding the Strait of Hormuz. Together, these factors are expected to determine whether gold can sustain its recent rally or encounter renewed volatility as markets reassess the global economic outlook.