Gold Tumbles as Strong US Jobs Report Fuels Rate Hike Expectations

Gold prices fell on Monday after a strong US jobs report was released, reviving expectations that the Federal Reserve could raise interest rates this month. The data showed employers added 162,000 jobs in August, well above market expectations, and reduced concerns about tighter monetary policy hurting the labor market.

The jobs report changed the near-term policy calculus for the Fed, which now has more room to focus on inflation. Futures markets were assigning a 58% probability to a rate increase at the September 15-16 meeting. For gold, higher rates are generally a headwind because bullion generates no income.

Peter Grant, senior metals strategist at Zaner Metals, said persistently firm inflation data this week could strengthen expectations for another Fed increase, putting additional pressure on the metal. The August producer price index is scheduled for Thursday, September 10, followed by the consumer price index on Friday, September 11.

The stakes are high after July headline CPI rose 3.4% from a year earlier, while core inflation stood at 2.5%, both above levels consistent with the Fed's 2% target. Independent analyst Tai Wong said the strength of the payrolls report had made a September increase significantly more plausible unless CPI delivers a weak reading.

Gold's longer-term support has not disappeared, particularly as tensions between the US and Iran continue to keep investors alert to geopolitical shocks. Other precious metals also weakened on Monday, with spot silver down 0.2%, platinum falling 0.8%, and palladium declining 0.7%.