Gold prices moved lower on Friday after stronger-than-expected U.S. employment data increased expectations that the Federal Reserve could still raise interest rates in September.
The U.S. economy added 162,000 jobs in August, far above forecasts for an increase of around 53,000. The unemployment rate remained unchanged at 4.1%.
The report marked a notable rebound from July, when payrolls had initially been reported as falling by 23,000.
Gold Prices Fall After Strong US Jobs Report
At 08:48 ET, XAU/USD was down about 2% at $4,391.61 an ounce. Gold futures declined 0.6% to $4,514.19.
Silver was little changed at $66.94 an ounce, while platinum fell 0.6% to $1,813.06.
Meanwhile, the U.S. Dollar Index rose around 0.2% to 99.03.
The stronger labor-market data supported the dollar and placed fresh pressure on gold prices.
Waller Comments Ease Some Fed Rate Hike Concerns
Gold had rebounded nearly 2% on Thursday after three consecutive sessions of losses.
The recovery gained momentum after Federal Reserve Governor Christopher Waller suggested he could support keeping interest rates unchanged at the Fed’s September 15-16 meeting.
Waller said his decision would depend heavily on upcoming inflation data. If inflation continues to cool, he indicated that holding rates steady could be appropriate.
However, he also left the door open to another rate hike if price pressures strengthen again.
Fed Rate Expectations Remain Uncertain
Markets have reduced their expectations for a September rate hike compared with earlier in the week.
The probability of another increase has fallen to around even odds after previously reaching roughly 70%.
However, Friday’s stronger jobs report complicated the outlook.
A resilient labor market could give the Federal Reserve more room to keep monetary policy restrictive. At the same time, relatively contained wage growth may prevent policymakers from becoming significantly more hawkish.
Investors are therefore likely to focus closely on upcoming inflation data before the Fed meeting.
Why Interest Rates Matter for Gold
Interest-rate expectations remain one of the most important drivers of gold prices.
Gold does not generate interest or yield. As a result, higher rates tend to make yield-bearing assets such as bonds more attractive compared with bullion.
Lower rates generally have the opposite effect.
If investors become more confident that the Federal Reserve will keep rates steady or eventually begin easing policy, gold could benefit.
However, stronger economic data could delay that shift and create renewed pressure on the precious metal.
US Dollar Adds Pressure on Gold
The modest rebound in the U.S. dollar following the jobs report also weighed on gold.
A stronger dollar typically makes gold more expensive for investors using other currencies, which can reduce demand.
Earlier in the week, weakness in the dollar had helped support bullion.
The Japanese yen also strengthened sharply on Thursday, rising nearly 2% in its strongest session since Japanese and U.S. authorities intervened in currency markets more than a month earlier.
The move kept traders alert for the possibility of further intervention from Tokyo.
Inflation Data Could Be the Next Major Catalyst
The August consumer price report due next week could be especially important for gold and Federal Reserve expectations.
The stronger payroll figures suggest the U.S. economy remains resilient. However, inflation will likely determine whether policymakers decide to raise rates or keep them unchanged.
If inflation continues to moderate, expectations for a September hike could fall further.
On the other hand, renewed price pressures could strengthen the case for another increase and weigh on gold.
Gold Faces Technical Resistance
Gold remains well above the roughly $4,282 low reached earlier in the week.
However, the recent rebound has faced resistance near the 200-day moving average around $4,526.
A sustained move above that level could improve the short-term technical outlook.
In contrast, failure to break higher could leave gold vulnerable to another pullback.
Middle East Tensions Remain in Focus
Gold also remains sensitive to geopolitical developments in the Middle East.
Earlier fighting pushed oil prices higher and increased concerns about renewed inflationary pressure.
More recently, signs that tensions may have peaked have helped reduce pressure from energy prices, Treasury yields, and the U.S. dollar.
Tony Sycamore, senior market analyst at IG, said improving risk sentiment also contributed to gold’s recent recovery.
He added that gold remains above its late-June low near $3,942, supporting his medium-term view that the metal may have established a base around that level.
What Comes Next for Gold?
Gold’s near-term direction will likely depend on inflation data, Federal Reserve expectations, the U.S. dollar, Treasury yields, and geopolitical developments.
The strong August jobs report has kept the possibility of another Fed rate hike alive.
However, signs of easing inflation and Waller’s cautious comments have prevented markets from fully pricing in additional tightening.
For now, traders will be watching the upcoming U.S. inflation report closely for the next major signal on monetary policy and gold prices.
