RPX Gold Inc. (TSXV: RPX)
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Spot gold held steady above $4,300 an ounce on Thursday following Wednesday’s nearly 4% rally, reaching an intraday high of $4,301 — its first return to this level since June 18. Despite having gained 25% year-to-date, bullion remains approximately 23% below the record high of nearly $5,600 set in late January.
The catalyst behind this rebound is a confluence of weaker-than-expected U.S. employment data and easing Middle East tensions. The ADP report showed that U.S. private employers added just 44,000 jobs in July, well below market expectations of about 70,000, which significantly dampened market expectations for a September rate hike by the Federal Reserve. At the same time, progress in U.S.-Iran negotiations over the Strait of Hormuz drove oil prices down roughly 10% this week, further alleviating inflation concerns.
However, gold’s rally is not driven solely by geopolitical risk premiums. BCA Research, a Canadian research firm, put forward a key judgment in its latest report — that gold’s heaviest headwinds may have passed, with the core logic being that real interest rates have likely peaked.
Roukaya Ibrahim, Chief Commodities Strategist at BCA Research, noted that the market has already fully priced in expectations of further Fed tightening for the remainder of the year. Even if the central bank does raise rates, the magnitude is unlikely to exceed current market expectations. She emphasized that gold does not necessarily require imminent Fed rate cuts to rally. “As long as the market confirms that the peak in real yields is behind us, the headwind from opportunity costs will gradually ease and eventually turn into a tailwind,” she said.
This logic pushes back against a common misconception in the market — that gold primarily benefits from inflation itself. BCA argues that inflation only truly benefits gold when it undermines confidence in the Federal Reserve and suppresses real yields. If inflation expectations remain well anchored, higher inflation initially pushes real yields higher, thereby weighing on gold.
In the near term, market focus has shifted to Friday’s upcoming July non-farm payrolls report. With June non-farm payrolls adding only 57,000 jobs — far below expectations — another weak reading would further solidify expectations of policy easing and provide upside momentum for gold prices. Conversely, a stronger-than-expected outcome could revive rate-hike expectations and exert short-term pressure on bullion.
Medium- and long-term structural support should not be overlooked. According to the World Gold Council, global central banks recorded net purchases of 289 tonnes of gold in the second quarter, approximately 1.6 times the pace of the same period last year, while gold-backed ETFs saw outflows of only about 45 tonnes over the same period. BCA believes that while the pace of official-sector purchases may have peaked, continued buying will still provide solid underlying support for gold prices.
