Gold tumbles as blockbuster US jobs report revives Fed rate-hike bets

Gold prices fell sharply on Friday after the US Bureau of Labor Statistics reported that nonfarm payrolls rose by 162,000 in August, nearly three times Wall Street's consensus forecast of roughly 56,000. The data revived expectations that the Federal Reserve will raise interest rates at its September meeting and erased much of a two-day recovery in precious metals.fxstreet+1

Spot gold dropped to around $4,400 per ounce, losing roughly 1.5% on the session after briefly climbing above $4,500 on Thursday. The metal fell as low as $4,367 within minutes of the release before recovering slightly. Silver also declined, falling through $65 per ounce.bullionvault+1

Labor Market Surprise Shifts Fed Calculus

The August payrolls figure caught markets off guard. July's initially reported decline of 23,000 jobs was revised to a gain of 21,000, while June payrolls were also revised higher, adding more than 50,000 jobs to previous estimates in total. The unemployment rate held steady at 4.1%.fxstreet+1

The report arrived one day after Fed Governor Christopher Waller offered what markets interpreted as a less hawkish tone, saying he was "finally seeing some signs of disinflation" and that the "current rate setting could get us back to 2% inflation." But Waller also warned: "If inflation comes in hot, I would consider a rate hike."bullionvault+1

Traders on the CME ↘ 0.27% derivatives exchange raised the odds of a September rate hike back to roughly 60%, after pricing the move as a coin flip on Thursday. The benchmark 10-year Treasury yield retested 4.81%, its highest level since late 2023, while the US Dollar Index rebounded to around 99.20 after falling to a one-week low a day earlier.fxstreet+1

Oil, Geopolitics Add to Inflation Pressure

The jobs data landed against a backdrop of elevated energy prices and Middle East tensions. Brent crude remained above $95 a barrel and WTI above $92, with ship traffic through the Strait of Hormuz still reduced following recent US-Iran exchanges. Analysts at OCBC cautioned that "higher oil prices are a two-sided risk if they feed back into inflation expectations and yields."kitco+1

US stock futures softened after the release as investors recalibrated for a higher-for-longer rate path, though technology shares held up relatively better.kitco

Next Test: August CPI

Markets now turn to the August Consumer Price Index report, due September 11, as the next decisive data point before the Fed's September meeting. Analysts at OCBC noted that "next week's CPI and PPI should be more decisive in determining whether the recent disinflation trend is sufficient to keep the Fed on hold."fxstreet

For gold, the near-term path remains caught between safe-haven demand driven by geopolitical risk and the downward pressure from rising yields and a firmer dollar — a tension the payrolls report tilted firmly toward the latter.kitco