The U.S. Bureau of Labor Statistics released data on Friday showing that non-farm payrolls increased by 142,000 in August, with the three-month average dropping to the lowest level since mid-2020. The unemployment rate slightly fell to 4.2%, marking the first decrease in five months, reflecting a reversal in temporary layoffs.
U.S. Treasury yields and the dollar fluctuated, while gold erased its initial gains, dropping by 0.6%. Swap traders increased bets on a 50 basis point interest rate cut by the Federal Reserve this month.
Phil Streible, Chief Market Strategist at Blue Line Futures, expressed concern for gold traders, noting that a 50 basis point rate cut by the Fed is not a good sign for the gold market. He pointed out that traders are trying to determine how many rate cuts we will see over what time frame. In the short term, gold prices are capped at $2,550. However, as the Fed enters a long-term rate-cutting cycle, gold prices are expected to rise again.
Federal Reserve officials have indicated that they are now more concerned about risks in the labor market rather than inflation. Given that price pressures have significantly retreated from pandemic peaks, policymakers are expected to begin cutting rates this month.
Following the non-farm payroll report, New York Fed President John Williams stated that, given the progress in reduced inflation and a cooling labor market, it is now appropriate for the Fed to cut rates. The Fed has made significant progress in achieving its dual mandate of maintaining price stability and full employment, and the risks to achieving these goals are now balanced.
Adrian Day, President of Adrian Day Asset Management, is bullish on gold. He pointed out that the poor employment data in the U.S. could increase the likelihood of a rate cut at the next Fed meeting, which he expects will drive gold prices higher.
Year-to-date, gold prices have soared over 20%. As of 10:21 AM New York time, spot gold was down 0.3% at $2,508.67 per ounce, having reached a historic high of $2,531.75 in August. The Bloomberg Dollar Spot Index remained virtually unchanged. Silver and palladium prices fell, while platinum prices held steady.
