Gold Waits on NFP Report as Rate Hike Bets Rebound
Gold (XAU/USD) held steady on Friday ahead of the highly anticipated US Nonfarm Payrolls (NFP) report, which will decide its next move. The metal briefly surged above $4,500 on Thursday, rising nearly 2% due to a softer US Dollar (USD), lower Treasury yields, and less hawkish remarks from Federal Reserve Governor Christopher Waller.
The US economy is expected to add 56K jobs in August after shedding 23K in July. Markets will closely watch wage growth and any revisions to the July payrolls figure. Fed Governor Waller said he's 'finally seeing some signs of disinflation,' adding that the current rate setting could get us back to 2% inflation.
His remarks prompted traders to pare back rate hike bets for the upcoming September 15-16 meeting, with the odds of a 25-basis-point (bps) rate increase now standing at around 50%. A stronger-than-expected NFP report could revive Fed rate hike bets and lift the US Dollar and Treasury yields, weighing on Gold. Conversely, another weak payroll reading could strengthen the case for the Fed to keep rates unchanged.
Analysts at OCBC remain 'constructive' on Gold but caution that the near-term path is likely to stay 'highly sensitive to Fed repricing.' They highlight that 'payrolls tonight may drive the next move in yields and the USD,' while 'next week's CPI and PPI should be more decisive in determining whether the recent disinflation trend is sufficient to keep the Fed on hold.'