Gold continued to rise above $1,700 an ounce as weak US data led to a significant change in sentiment in the precious metals markets.
Risk aversion has diminished and investors are no longer interested in the US dollar as a safe haven.
Spot gold rose 1.1% to $1,719.04 an ounce by 10:40 am ET, the highest in three weeks. US gold futures added 1.5% to trade at $1,727.60 an ounce in New York.
Meanwhile, benchmark 10-year US Treasury yields fell to nearly a two-week low, while the dollar continued its decline, making gold cheaper for other currency holders.
Precious metals are now approaching their 50-day moving average after rising on Monday, when the US manufacturing index fell more than expected. The price has been trading mostly below the technical marker since April, which is a sign of bad sentiment as the safe-haven metal fell into a bear market.
The metal is now at a pivotal juncture as traders look to this week's US nonfarm payrolls data for more insight into the future direction of the central bank's monetary policy. A weaker-than-expected report could further dampen rate hike expectations, supporting precious metals at a major technical turning point.
"Gold broke $1,700/oz again, meaning that a break below $1,660-$1,700/oz was a false break for me," said an analyst at ABN Amro Bank NV.
Other U.S. jobs data, including jobs data and ADP Research Institute data, will also be key this week.
“If the employment data comes out weaker than expected, gold will rise. If it turns out to be much stronger, the market could interpret this the same way the Fed could continue here with rates,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.
So far, the Federal Reserve has struggled to dampen the labor market with tighter policies, a major part of its decades-long fight against inflation.
A tighter central bank policy tends to hurt gold by pushing up bond yields, making an unprofitable asset less attractive. Safe haven flows and expectations of more aggressive rate hikes in the US than elsewhere have also led to a rally in the dollar, which is negatively correlated with gold.