Gold prices declined on Monday, extending Friday's losses, after a robust US jobs report revived speculation that the Federal Reserve could raise interest rates at its September meeting. The precious metal traded near $4,405 an ounce in early Asian hours, down 0.5%, following a 1% drop on Friday. US gold futures for December delivery also slipped 0.5% to $4,452.20.
The pressure stems from data released last Friday showing that US employers added 162,000 jobs in August, while the unemployment rate held steady at 4.1%. The payroll gain was well above market expectations and marked a significant improvement from the subdued hiring seen earlier in the summer. Additionally, revisions to June and July payrolls were upward, with combined employment gains for the two months now 55,000 stronger than previously estimated, according to the Bureau of Labor Statistics.
This stronger labor market data has reduced concerns that tight monetary policy is causing serious damage to the economy, giving the Fed more room to focus on inflation. As a result, futures markets are now pricing in roughly a 58% probability of a rate hike at the September 15-16 meeting. For gold, higher rates are typically a headwind because the metal yields no income, making it less attractive relative to interest-bearing assets.
Peter Grant, senior metals strategist at Zaner Metals, told The Wall Street Journal that if inflation data this week remains firm, it could strengthen expectations for another Fed increase, adding further pressure on gold. The market's attention now shifts to the August producer price index, due Thursday, September 10, and the consumer price index, due Friday, September 11. July's headline CPI rose 3.4% year-over-year, while core inflation stood at 2.5%, both above the Fed's 2% target.
Independent analyst Tai Wong, cited by FXStreet, noted that the strong payrolls report has made a September rate increase significantly more plausible unless CPI comes in weak. This makes Friday's inflation number potentially more important for gold than the jobs report itself. A softer inflation reading could pull Treasury yields lower and revive bullion demand, while another firm print would reinforce the case for tighter policy.
Despite the recent retreat, gold's longer-term support remains intact, particularly due to ongoing geopolitical tensions between the US and Iran, which keep investors alert to potential shocks. There is also a complex interplay with energy markets: higher oil prices can boost safe-haven demand, but they can also lift inflation expectations and encourage central banks to keep rates higher. This tension has left gold elevated even as it pulls back from recent highs.
Other precious metals also weakened on Monday. Spot silver slipped 0.2% to $66.03 an ounce, platinum fell 0.8% to $1,805.53, and palladium declined 0.7% to $1,396.08. Investors will be closely watching the upcoming inflation data for further direction, as it could determine the near-term path for gold and other metals. For broader market context, the S&P 500's record run has been supported by strong earnings, but geopolitical risks remain a wildcard. Meanwhile, bitcoin faces its own resistance as ETF demand stays strong, and tech stocks have rallied on Nvidia's forecast, but the macro backdrop remains key for all assets.
This article is for informational purposes only and does not constitute financial advice.
