Gold Climbs as Weak U.S. Jobs Data Fuels Rate Cut Expectations
A significant slowdown in U.S. job growth has sent gold prices soaring, with investors increasingly betting on an imminent interest rate cut from the Federal Reserve.
Market Reaction to Economic Data
The price of gold saw notable movement following the release of August employment figures from the United States. The data revealed a sharp weakening in job growth, pushing the country’s unemployment rate to its highest level in four years. This economic softness has directly increased market anticipation that the Federal Reserve will move to lower interest rates at its upcoming meeting.
Traders Bet on Fed Policy Shift
Market traders are now overwhelmingly confident, with expectations firmly set on a 25-basis-point reduction in the benchmark rate this month. There is also an 8 percent probability being assigned to a more substantial 50-basis-point cut. Such a shift in monetary policy decreases the opportunity cost of holding non-yielding assets like gold and simultaneously exerts downward pressure on the U.S. dollar. A weaker dollar makes dollar-priced gold less expensive for investors holding other currencies, thereby stimulating demand.
A Strong Year for Bullion
This latest development continues a powerful trend for the precious metal. Since the beginning of the calendar year, gold has registered an impressive 37 percent gain. The 27 percent price increase witnessed in 2024 is widely attributed to a confluence of factors, including a softer dollar, substantial purchasing by central banks, a global trend towards easier monetary policy, and broader geopolitical and economic uncertainties.
Central Banks Continue to Accumulate
underscoring the sustained institutional demand, the People’s Bank of China reportedly increased its gold reserves again in August. This marks the tenth consecutive month that the central bank has expanded its holdings of the precious metal.
Other Precious Metals
In related markets, the prices of other precious metals showed mixed results. Silver experienced a slight decline, while platinum saw a marginal increase.