Gold Drops as Strong U.S. Jobs Data Boosts Rate Hike Bets Ahead of Key Inflation Print
Gold prices declined at the start of the week, pressured by rising expectations of U.S. interest rate hikes following robust labor market data. Investors remain focused on upcoming U.S. inflation figures scheduled for release later this week for fresh signals regarding the Federal Reserve's monetary policy path.
Spot gold fell 0.5% to $4,405.47 per ounce by 02:11 GMT, after sliding 1% at the close of Friday's session, while U.S. gold futures for December delivery dropped 0.5% to $4,452.20 per ounce. The downward momentum reflects a market reassessment of monetary policy trajectories after stronger-than-expected U.S. employment data reinforced bets on prolonged policy tightening.
Labor Data Reshapes Fed Expectations
According to the CME Group's FedWatch tool, traders are currently pricing in an estimated 58.4% probability of an interest rate hike at the Federal Reserve's upcoming policy meeting on September 15–16.
This shift holds particular significance for bullion: gold typically benefits from low interest rates and muted real yields because it yields no periodic return. When borrowing costs and Treasury yields climb, the opportunity cost of holding non-yielding gold rises relative to yield-bearing assets, curbing investor appetite.
Market participants now await U.S. inflation data due later this week, viewed as a critical barometer that could dictate whether the Fed will proceed with a rate increase or keep borrowing costs steady. A higher-than-expected inflation print could push Treasury yields higher and bolster the U.S. dollar, intensifying downward pressure on bullion. Conversely, a softer inflation reading could revive expectations for policy easing and give the precious metal room to recover.