Gold breaks past $4,400 as weak jobs data cools Fed hike odds

Gold spot broke above $4,400 per ounce on Aug. 10, the highest since early June, after July nonfarm payrolls fell 23,000 against expectations for an 85,000 gain.

"The data has brought good news for gold and for the markets, but for the Fed, this is another huge problem, especially when inflation is this high," Waleed Said, technical analyst at GivTrade, said.

Markets now price a 42 percent chance of a September rate hike, down from nearly 60 percent before the jobs report, according to the CME FedWatch Tool. Spot gold last traded at $4,344/oz, up more than 7 percent from the prior Friday. May and June payrolls were revised down by a combined 103,000 jobs, while the labor force participation rate fell to 61.4 percent, near a five-and-a-half-year low.

Gold last traded above $4,400 in early June. The July CPI report due Aug. 12 — expected at 3.4 percent year-over-year, down from 3.5 percent — and PPI on Aug. 13 will determine whether the metal can hold above $4,400 and test the $4,500 psychological level.

July Jobs Report Reshapes Rate Expectations

The labor market deterioration extends beyond the headline number. ADP's private-sector payrolls report showed only 44,000 jobs created in July, missing expectations and triggering gold's initial push above $4,200/oz. The unemployment rate ticked lower to 4.1 percent, but analysts attributed the decline to a 264,000 contraction in the labor force rather than employment gains. Average hourly earnings growth slowed to 3.2 percent year-over-year, reflecting softer wage pressures.

The weak employment data has created a favorable setup for gold through two channels: lower real yields and a weaker dollar. Treasury yields moved lower after the release, reducing the opportunity cost of holding non-yielding bullion. The dollar index also retreated, providing additional support for dollar-denominated commodities.

CPI and PPI: The Next Catalyst

The Federal Reserve's September decision hinges on the upcoming inflation prints. Economists polled by Reuters expect core CPI to slow to 2.5 percent year-over-year from 2.6 percent, with a 0.2 percent month-over-month increase. The July PPI report, due Aug. 13, is expected to show a modest 0.1 percent monthly gain, following June's 0.3 percent decline — the largest monthly drop in 14 months.

Citi believes another round of weaker-than-expected inflation data could significantly reduce the likelihood of a September hike. Bank of America cautions that if core services inflation accelerates again, the Federal Reserve may keep further tightening on the table.

Nicky Shiels, head of research and metals strategy at MKS PAMP, said CPI needs to "really miss" next week for markets to price the Fed on hold through year-end, which would provide the assurance for gold to probe $4,500. Alex Kuptsikevich, chief market analyst at FxPro, noted the 50-week moving average sits near $4,400, with the next resistance at $4,500. "The path to 4,500 may prove relatively easy, but beyond that, we should brace ourselves for a very significant tug-of-war," he said.

Gold at $4,344/oz trades roughly 8 percent above its 200-day moving average near $4,000, which served as support during the two-month consolidation that preceded this breakout. The metal's 7 percent weekly gain is its best since the start of the year, and COMEX gold futures have tracked spot higher, with open interest rising as momentum funds re-enter long positions.

This article is for informational purposes only and does not constitute investment advice.