Gold Plunges as Strong Jobs Data Reverses Fed's Brief Dovish Turn

The Fed's dovish turn was short-lived as the market quickly corrected after strong August payrolls data. Gold, which had risen to its best day in weeks on Thursday, plunged almost as much as it had rallied yesterday. The precious metal closed at $4,427, falling from its high of $4,539.90.

The strong jobs numbers, which rose 162,000 in August, the strongest month since March, and a rise in wages, sent short-end yields higher and moved the odds of a hike back above 60 percent. This contradicts Fed Governor Waller's earlier statement that he would lean towards holding in September if August inflation shows progress.

The USD Index also reversed its decline, rising after hitting a low near 98.9 overnight, and the dollar is now rising anyway. The Bank of Japan is still expected to hike on September 18, and the headwind that produced yesterday's decline is still blowing.