US Jobs Contraction Triggers Gold Surge, Rate Hike Expectations Plummet

A weaker-than-expected US jobs report led investors to scale back expectations for a Federal Reserve rate hike, boosting gold prices and oil volatility.

The Bureau of Labor Statistics reported that nonfarm payrolls fell by a seasonally adjusted 23,000 jobs in July, the first monthly decline in years. Economists had expected payrolls to increase by about 83,000 jobs during the month.

Average hourly earnings rose just 3.2% from a year earlier, below expectations. Following the report, traders reduced expectations for a September Federal Reserve rate hike, with CME Group's FedWatch tool showing the probability of a September increase fell to 44%.

Gold rallied sharply after the weak employment report reduced expectations for additional Federal Reserve tightening. Spot gold climbed 2.3% to $4,340.19 per ounce, reaching its highest level since June 17.