On COMEX, gold futures climbed 1.3% to $4,361.30 an ounce, while silver futures gained 0.65% to $62.695 an ounce. In the spot market, gold touched $4,285.84 an ounce, its highest level since June 18.
The latest gains come after bullion recorded its biggest single-day advance since February in the previous session.
Why are gold and silver rising?
The rally is being driven by multiple factors that have simultaneously turned favourable for precious metals.
Softer dollar makes gold cheaper
The US dollar weakened against major currencies, making dollar-denominated commodities such as gold and silver more affordable for overseas buyers. A weaker dollar typically supports demand for bullion in global markets.
Bond yields decline
US Treasury yields also eased, reducing the opportunity cost of holding non-yielding assets like gold. When bond yields fall, investors often increase allocations to precious metals.
Hopes of easing West Asia tensions
Markets turned optimistic after reports suggested diplomatic efforts could lead to a breakthrough in the West Asia, including discussions around reopening the Strait of Hormuz. Expectations that tensions could ease pushed oil prices lower.
Lower crude prices also reduce fears of energy-led inflation, which, in turn, lowers expectations of aggressive interest rate increases by central banks. That creates a supportive environment for gold.Rate-cut expectations remain in focus
Investors are also reassessing the outlook for US monetary policy after weaker-than-expected private payroll data signalled some cooling in the labour market.
Market participants are now awaiting the US non-farm payrolls report due on Friday (August 7). A softer jobs report could strengthen expectations of lower interest rates, which would further support gold. Conversely, stronger-than-expected employment data could weigh on bullion by reviving expectations of tighter monetary policy.
What about silver?
Silver also remained firm, supported by the same macroeconomic factors lifting gold. Besides benefiting from lower bond yields and a weaker dollar, silver continues to draw support from its dual role as both a precious and industrial metal.
With investors closely watching upcoming US economic data and central bank expectations, volatility in both gold and silver is likely to remain elevated in the near term.
-With Reuters inputs
