Gold and Dollar Rise Together as Euro Weakens and Oil Drops

The latest jobs report in the US delivered a mixed bag of data that typically favors gold prices. Non-farm payrolls rose by just 29,000, well below expectations of 85,000 to 90,000. Revisions also cut 60,000 jobs from previous months, the unemployment rate ticked up to 4.2 percent, and wage growth slowed to 0.1 percent. These figures significantly reduced the odds of a Federal Reserve rate hike in October to around 20 percent, down from 70 percent earlier in the week.

Despite the gold-friendly data, gold prices initially surged to $4,239 before settling $40 lower at $4,162.30, ending the week down 3.6 percent. Silver fared worse, dropping 6.7 percent on the week. This counterintuitive reaction is attributed to the long end of the bond market, which defied expectations by rising. The 30-year Treasury yield dipped briefly below 5.17 percent but closed higher at 5.276 percent, reflecting persistent inflation concerns and the Treasury's need to sell significant debt.

Gold's struggle can be traced to its reliance on long-term Treasury yields, which act as its primary competition. When these yields rise, gold becomes less attractive. Meanwhile, stocks rallied as the softer Fed outlook reduced near-term financing costs, while the broader economic data did not signal a recession. This divergence in reactions highlights the complexity of market dynamics, where gold and stocks can move in opposite directions based on different bond market signals.

Currently, gold and the US dollar are rising simultaneously, a rare occurrence typically explained by external factors. The euro's decline to its lowest level since May 2025, driven by fiscal concerns in France and political uncertainty in Spain, has boosted the dollar. Additionally, falling oil prices have eased inflation expectations, further supporting gold. European investors seeking a hedge against bond market stress are also buying gold, contributing to its rise.