Gold Slumps on Hawkish Fed Bets and Trump's Rate Cut Demands

A strong US jobs report has sent gold prices tumbling as investors now expect a September Federal Reserve rate hike. The non-farm payrolls print showed US employers added 162,000 jobs in August, nearly three times the market's forecast of around 53,000.

CME's FedWatch tool puts the odds of a 25-basis-point hike at the Fed's September 15-16 meeting at 60.4 per cent, which would take rates to a range of 3.75-4.00 per cent from the current 3.50-3.75 per cent.

Ross Maxwell, chief strategy officer at VT Markets, said gold is caught between two competing forces: growing expectations that the Fed could keep rates higher and President Trump's continued calls for lower borrowing costs.

A rate hike would typically push US Treasury yields higher still, making bonds relatively more attractive. The 2-year yield has already climbed over 4 basis points to 4.37 per cent, while the 10-year is up over 2 basis points at 4.78 per cent.