Gold held its decline, trading near $4,430 an ounce, after falling 1% in the previous session. This comes as robust US job growth in August, with the unemployment rate remaining steady, bolstered the case for an interest rate hike at the Federal Reserve's September 15-16 meeting. Short-term interest rate futures indicate about a 60% likelihood of a rate increase, up from an even chance earlier.
The strong employment data, which showed 162,000 non-farm jobs added in August (nearly triple the market expectation of 56,000) and an upward revision for July, has made gold, a non-interest-bearing asset, less attractive. Independent analyst Tai Wong noted that the strong jobs report makes a September rate hike much more likely unless upcoming CPI data is weak. This sentiment was echoed by Bybit's chief market analyst Han Tan, who believes the report has widened the door for the Fed's hiking intentions.
Adding to market complexities, geopolitical risks escalated over the weekend with clashes between the US and Iran in the Strait of Hormuz, where Iran reportedly targeted oil tankers. While such tensions typically increase safe-haven demand for gold, the immediate impact of rate hike expectations outweighed this factor. The US dollar strengthened, making dollar-denominated gold more expensive, and Treasury yields rose, drawing funds away from gold.
Spot gold initially plummeted over 2% to an intraday low of $4,364.99 per ounce on Friday before closing at $4,430.15, marking a 1% daily and 0.58% weekly decline. December gold futures settled at $4,476.60, down 1.4%. The focus now shifts to the upcoming US consumer and producer price inflation data this week, which will be crucial in determining the Federal Reserve's policy path and gold's short-term trajectory.
