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Gold falls below $4,400 as strong US jobs data raise the prospects for Fed rate hike

  • Gold price slumps to around $4,395 in Monday’s early Asian session. 
  • US NFP rose by 162K in August, stronger than expected. 
  • US and Iran traded retaliatory attacks on ships over the weekend. 

Gold price (XAU/USD) tumbles to near $4,395 during the early Asian session on Monday. The precious metal extends the decline as robust US employment data boost US Federal Reserve (Fed) rate hike bets. 

The US Nonfarm Payrolls (NFP) climbed by 162K in August, the US Bureau of Labor Statistics (BLS) revealed on Friday. This figure followed July's increase of 21K and beat market expectations of 56K by a wide margin. The upbeat US jobs data boosted expectations that the US central bank could raise interest rates as soon as this month, denting non-yielding bullion's appeal.

“Gold stumbles badly as a huge headline print, and an overall strong report, makes a September rate hike much more likely unless we get a weak CPI report," independent analyst Tai Wong said.

Traders will take more cues from the US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation reports later this week for further clues on the Fed's policy path.

Markets dialled up bets on a rate hike in September, pricing in a roughly 58.3% likelihood versus an even chance earlier in Friday’s session, according to the CME FedWatch tool. 

Furthermore, escalating tensions in the Middle East could stoke oil-driven inflation fears and contribute to the yellow metal’s downside.  Bloomberg reported on Sunday that Iran said that it targeted three oil tankers using an unauthorized route through the Strait of Hormuz, as well as a number of US-linked ships, in retaliation for US attacks on Iranian tankers over the weekend. 

Gold rebound underpinned as Fed hike doubts grow

According to Commerzbank, the latest upswing in Gold prices “reflects growing doubts that the Federal Reserve will raise interest rates at its September meeting after all.” The bank notes that these doubts have “recently been fueled primarily by comments from Fed Governor Christopher Waller,” whose remarks have led markets to reassess the likelihood of further tightening and, in turn, helped underpin the metal’s rebound.

Chart Analysis XAU/USD

Technical Analysis: Gold price retains a mildly bullish bias above the 100-day SMA

In the daily chart, XAU/USD holds above the 100-day Simple Moving Average (SMA), keeping the near-term bias mildly bullish despite the recent pullback from higher highs. Price is now trading below the 20-day Bollinger mid-line, suggesting a consolidation phase within an overall uptrend, while the Relative Strength Index (14) around 51 hints at neutral but stabilising momentum after overbought readings unwound.

On the topside, initial resistance emerges at the 20-day Bollinger middle band near $4,465, with the upper Bollinger band around $4,675 acting as a farther cap if buyers regain control. On the downside, immediate support sits close to the latest close around $4,405, ahead of the 100-day SMA near $4,350; a deeper slide would expose the lower Bollinger band support near $4,260, where dip-buying interest could reappear.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

(This story was corrected on September 7 at 01:45 GMT to say, in the first paragraph, that Gold price (XAU/USD) tumbles to near $4,395 during the early Asian session on Monday, not European session.)

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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