Gold Price Under Pressure as Fed Rate Hike Expectations Rise

Gold prices have been under pressure in recent days due to stronger-than-expected US jobs data, which has reshaped market expectations about the Federal Reserve's monetary policy path.

The release of August's nonfarm employment figures showed a significant increase of 162,000 jobs, exceeding market forecasts of just 56,000. This development has led to increased expectations for a rate hike at the September meeting, with market pricing for a 25-basis-point increase rising to nearly 58%.

However, the author views this repricing as partially overreacted, considering that the unemployment rate remained stable at 4.1%, and wage growth did not deliver an inflationary signal of the same intensity as the headline jobs figure.

The upcoming CPI and PPI reports will be crucial in determining the next course for gold prices. If inflation comes in hotter than expected, markets may raise interest-rate expectations further, leading to a rise in Treasury yields and the dollar.

On the other hand, if inflation data come in softer than expected, rate-hike expectations could decrease, and gold might recover a significant portion of its recent losses.