Gold prices surge: US non-farm payroll data disappoints, Fed rate hike expectations hit hard

Golden Finance, August 8 —— The July nonfarm payrolls data unexpectedly recorded a decrease in jobs, causing the probability of a Federal Reserve rate hike to fall sharply. The market is hopeful for the reopening of the Strait of Hormuz to navigation, putting pressure on oil prices, and indirectly benefiting gold prices.

On Friday (August 7) during the European session, spot gold surged sharply, with a single-day gain of over 2.30% and a weekly gain of over 7%. US employment data was mixed: nonfarm payrolls missed expectations, but the unemployment rate remained stable. At the time of writing, spot gold was trading at $4,340/ounce, having touched $4,371/ounce earlier in the day, marking a new high since June 17.

The July US nonfarm payrolls data disappointed the market, with 23,000 jobs lost, while expectations had been for an increase of 80,000. May and June nonfarm payrolls data were also revised down, with a combined downward revision of 103,000 in job positions over the two months, significantly narrowing the scale compared to previous figures. Although the data validates the Federal Reserve's reluctance to raise rates to combat inflation as reasonable, the unemployment rate eased slightly from 4.2% to 4.1%.

After the data release, US Treasury yields and the US dollar both declined. The 10-year US Treasury yield fell by 2 basis points to 4.687%, providing positive support for gold prices.

The dollar index fell by 0.42% intraday, to 99.54.

Richmond Fed President Thomas Barkin stated: "The employment data fully reflects supply and demand imbalances in some sectors and weak business sentiment." He added that the report indicates the labor market is in a "low hiring, low layoff" state.



Geopolitical factors continue to stir financial markets, as market expectations for the reopening of the Strait of Hormuz to navigation increase. President Trump stated he believes the conflict with Iran may soon be over.

However, Iran said, according to reports, that the agreement reached with Oman would only establish a temporary shipping channel — with the deal aiming to prohibit US and Israeli ships from passing through the strait, and not representing a full reopening of the strait.

US West Texas Intermediate (WTI) crude was broadly flat during the day at about $78/barrel, but was down nearly 9.9% for the week.

Swap market pricing shows that the probability of a Federal Reserve rate hike at the September meeting has declined further. PrimeTerminal data shows the current probability of a rate hike in September is just 30%, down from 58% the previous day; the probability of keeping rates unchanged has reached 70%.

Traders will focus on the US July Consumer Price Index (CPI) to be announced on Wednesday. Economists predict inflation will ease from 3.5% year-on-year to 3.4%, while core CPI will dip from 2.6% to 2.5% year-on-year.

The Producer Price Index (PPI), an important reference for the Fed's preferred inflation gauge—the Core Personal Consumption Expenditures (PCE) Price Index—will be released on Thursday.



(Spot gold daily chart Source: Easetong)

Bullish momentum in gold is rising again and has now climbed above the 50-day simple moving average (SMA) of $4,152/ounce, currently pushing toward the 100-day moving average at $4,390/ounce. The Relative Strength Index (RSI) indicates market momentum has turned bullish, with minimal resistance ahead.

The next key target is the 200-day moving average at $4,390/ounce. If this level is broken, the next important resistance is at $4,450/ounce, then towards the $4,500 mark.

On the downside, the previous high of July 6 has now become the first support level at $4,202/ounce. If this support is lost, the next support is at the 50-day moving average of $4,152/ounce and at $4,100; further down, the intraday low of August 3 at $4,019/ounce provides additional support.

At 02:05 (GMT+8), spot gold was at $4,340.12/ounce, up 2.35%.