Gold Prices Plummet as Strong US Jobs Report Sparks Rate Hike Expectations

Gold prices plummeted on Friday following a stronger-than-expected US employment report. The Bureau of Labor Statistics reported that nonfarm payroll employment increased by 162,000 in August, exceeding market consensus and boosting expectations for a Federal Reserve rate hike at its September meeting.

The immediate reaction was severe, with spot gold dropping below $4,400 per ounce and briefly falling to around $4,365 before recovering part of the losses. At one point, the metal was down more than 2% on the day as the US dollar strengthened and Treasury yields moved higher.

Interest-rate futures reacted immediately, shifting market pricing through CME FedWatch to a three-in-five probability of a Federal Reserve rate increase in September, up from around a 50-50 chance a day earlier. The move also pushed US government bond yields higher, with the yield on the benchmark 10-year Treasury approaching levels last seen around the previous day's peak.

The inflation data may prove decisive for the Fed's next move, particularly as investors await the August Consumer Price Index report scheduled to be published on September 11. A stronger-than-expected CPI reading would reinforce the case for tighter monetary policy, while evidence that price pressures are easing could reduce expectations for a September increase.