Gold slips as strong US jobs data fuels rate hike expectations

Gold prices edged lower on Monday after stronger-than-expected US employment data reinforced expectations that the Federal Reserve could raise interest rates, while investors awaited key inflation readings later this week for further direction.

 

Spot gold declined 0.5% to $4,405.47 per ounce as of 0211 GMT, extending losses after falling 1% in the previous session. US gold futures for December delivery also dropped 0.5% to $4,452.20 per ounce.

 

Fresh data released on Friday showed that US job growth accelerated sharply in August, while the unemployment rate remained steady at 4.1%, signalling an improvement in labour market conditions and keeping the possibility of an interest rate increase at the Fed's September meeting alive.

 

Markets are now focused on upcoming US inflation data, with the producer price index (PPI) scheduled for release on Thursday and the consumer price index (CPI) due on Friday.

 

According to CME's FedWatch tool, traders are currently pricing in a 58.4% probability of a rate hike at the Federal Reserve's September 15-16 policy meeting.

 

Analysts said the stronger jobs report has created pressure on gold, although inflation data will play a crucial role in determining the Fed's next move. A higher-than-expected inflation reading could further strengthen rate hike expectations, push bond yields higher and weigh on the non-yielding precious metal.

 

Gold is traditionally considered a hedge against inflation and economic uncertainty, but higher interest rates reduce the attractiveness of bullion as it does not offer interest or dividend returns.

 

Meanwhile, geopolitical tensions in the Middle East remained on investors' radar, with Iran indicating that it would intensify efforts to counter the economic impact of US sanctions amid warnings of a stronger response to any further attacks.

 

Among other precious metals, spot silver slipped 0.2% to $66.03 per ounce, platinum declined 0.8% to $1,805.53, while palladium fell 0.7% to $1,396.08 per ounce.