Gold Pulls Back Ahead of US PPI Data

Gold fell 2% to around $4,380 an ounce on Friday as the dollar strengthened following stronger-than-expected US employment data, which boosted expectations for tighter monetary policy. US nonfarm payrolls rose by 162,000 in August, following an upwardly revised increase of 23,000 in July and significantly exceeding market expectations for a 56,000 gain. Meanwhile, the unemployment rate held steady at 4.1%, while annual wage growth eased to 3.1%, although the decline was smaller than markets had anticipated. The resilient labor-market data strengthened the case for tighter monetary policy, with money markets now pricing in a near 60% probability of a Federal Reserve rate hike in September, according to the CME FedWatch Tool.

Gold traded near $4,500 an ounce on Friday after rising for two consecutive sessions, as dovish comments from Federal Reserve Governor Christopher Waller led markets to scale back expectations for a September rate hike. Waller said he would favor keeping rates unchanged if price pressures continue to ease. Traders now see roughly a 50% probability of a September rate hike, down from about 63% a day earlier. Investors are also awaiting Friday’s payrolls report and next week’s inflation data for additional clues on the Fed’s policy outlook. The US dollar and Treasury yields fell sharply following Waller’s remarks, supporting bullion. Meanwhile, oil prices were on track for a strong weekly gain amid ongoing hostilities in the Middle East and heightened uncertainty over shipping through the Strait of Hormuz, keeping inflationary risks in focus.

Gold climbed to around $4,470 an ounce on Thursday, rebounding from more than three-week lows as the US dollar and Treasury yields retreated from recent highs following dovish comments from Federal Reserve officials. Markets scaled back expectations for a Federal Reserve rate hike after Fed Governor Christopher Waller said he sees continued progress on inflation and would support keeping interest rates unchanged at the September meeting if that improvement is confirmed in the August data. Waller's comments followed remarks Wednesday from New York Fed President John Williams, who said there is evidence that inflation continues to ease as the impact of tariffs fades. A weaker-than-expected ADP employment report, meanwhile, pointed to a slowdown in the US labor market. Traders now see roughly a 50% probability of a September rate hike, down from about 62% before Waller's comments. Investors now await Friday's payrolls report and next week's inflation data for further clues on Fed policy.