Gold Tumbles Amid Weaker Dollar, Soaring Treasury Bond Yields
Gold prices were mixed on Friday, but still poised for their fifth negative week in six. The metal's decline was partly offset by a weaker US dollar, which tends to make gold more expensive for foreign buyers.
The jobs report released earlier this week showed nonfarm payrolls rose just 29k last month, significantly lower than the estimated figure of 89k. This has reduced expectations of an imminent Federal Reserve interest rate hike, with odds now at nearly 23% compared to around 77% for keeping rates steady.
Chris Osmond, chief investment officer at Fifth Third Wealth Advisors, pointed out that this report indicates a 'stagflationary signal' - a sign of both inflation and economic stagnation. This complicates the Fed's path significantly as they balance their dual mandate of controlling inflation and promoting employment.
The bond market has been hit hard by these changes in Fed rate expectations, with longer-term maturities suffering due to oil-related inflationary concerns and jitters around debt being issued by companies to fund artificial intelligence infrastructure buildouts. This has weighed on gold prices, which are down 3.4% for the week.