【TMGM Financial Recap】Strong Nonfarm Payroll Data Impacts Gold Prices; This Week's CPI And PPI Data Become A Life-Or-Death Crisis For Gold!
Last Friday, the US released major employment data that completely disrupted the previously calm pace of the gold market. Spot gold once plunged more than 2%. This nonfarm payroll report, which far exceeded market expectations, not only reinforced expectations that the Federal Reserve might raise interest rates this month, but also instantly weakened gold's appeal. On the Saturday after the employment data was released, direct clashes between the US and Iran erupted again in the Strait of Hormuz, with geopolitical risks suddenly heating up and adding another layer of complex variables to the already pressured gold price. Now it's Monday, and the US market is closed for Labor Day. Global investors are eagerly awaiting this week's key inflation data, and gold's short-term fate will be rewritten in this dual battle between data and geopolitics.
U.S. nonfarm payrolls surged by 162,000 in August, nearly three times the market expectation of 56,000, while the unemployment rate remained steady at 4.1%. More importantly, the July data was sharply revised upward, from the originally announced decrease of 23,000 to an increase of 21,000. The message conveyed by this report is very clear; After a period of weakness, the labor market has regained resilience. The recovery of the leisure and hospitality industry, local government education departments, as well as manufacturing and construction, has jointly supported job growth, with average weekly working hours extending to 34.4 hours, the longest since March 2024.
For gold, strong employment data directly boosted market bets on Fed rate hikes. Short-term interest rate futures show that the probability of a Fed rate hike at the September 15-16 meeting rose from about 50% before the data release to around 65%, then declined slightly but remained around 58%, with an 83% probability of at least one rate hike this year. Unless the subsequent CPI report weakens, the likelihood of a rate hike in September will increase significantly.
Meanwhile, the US dollar index strengthened, making gold priced in dollars more expensive for investors holding other currencies. US Treasury yields rose simultaneously, with two-year Treasury yields hitting their highest level since January 2025, and 10-year yields also rising significantly. Funds are withdrawing from safe-haven assets like gold and shifting toward interest-rate-sensitive assets—this is the core logic behind last Friday's pressure on gold prices. Notably, despite strong employment, wage growth slowed, rising 3.1% year-on-year in August, down from the previous 3.2%. This somewhat supports inflation cooling and leaves the market still divided on the next policy path.
The market is generally focused on Thursday's Producer Price Index (PPI) and Friday's Consumer Price Index (CPI). Economists expect August's core CPI year-on-year increase to slow further from 2.5% in July to 2.4%.
Market Insight:
If the data confirms inflation continues to cool, the wait-and-see sentiment within the Fed may regain traction, easing pressure on gold prices. Conversely, if inflation data is strong, especially if there are clear signs that energy price increases are being transmitted to broader sectors, rate hike expectations will heat up again, and gold may face a new round of selling pressure.
