57,000 jobs added in June. Half of what was expected. Fed rate hike odds dropped. Gold moved up $150 in 24 hours. First weekly gain in five weeks. All connected.
Gold Had a Strong 24 Hours
Gold climbed above $4,170 Friday. Up more than 1% on the day. Roughly $150 gained in the past 24 hours. First weekly gain in five weeks after a rough stretch that saw gold drop 13% during Q2.
Week as a whole gold is up about 2.3%. Not a massive move but meaningful after the losing streak it was on. Something shifted in the market’s thinking and jobs data on Thursday was the trigger.
Dollar also weakened over the week. That helped gold on top of the rate story. Gold is priced in dollars so when dollar softens it becomes cheaper for buyers in other currencies. More global demand comes in and price gets support from that angle too.
Jobs Report Did the Work
Thursday’s nonfarm payrolls came in at 57,000. Estimates were around 110,000 to 115,000 depending on who you asked. Big miss either way.
Weak jobs data tells the Fed the economy is slowing. Slowing economy means less inflation pressure. Less inflation pressure means less urgency to raise rates. That chain of logic moved fast through gold markets.
Probability of a September rate hike fell from 66% before the report to 54% after it according to CME FedWatch. That shift alone was enough to bring buyers back into gold. When the rate hike timeline gets pushed out or made less certain gold becomes more attractive compared to bonds and cash.
Why Rates Matter So Much for Gold
Gold pays no interest. Zero yield. When rates are rising or expected to rise bonds become more attractive because they pay you to hold them. That is the opportunity cost argument against gold.
When rate expectations cool that argument weakens. Bonds still pay interest but the gap between bond yields and gold’s zero yield gets less dramatic if rates are going to stay flat or move slower than expected. Money that had moved into bonds and out of gold starts considering coming back.
That is what happened this week. Rate hike odds came down. Dollar softened. Gold moved up. Simple and direct connection.
Fed Still Controls What Happens Next
One jobs report does not change the entire picture. Fed chair Warsh has been clear about prioritizing inflation. Nine of eighteen policymakers still see rates moving higher before year end. September hike is still priced in at 54% probability. That is above a coin flip.
Gold is going to keep reacting to every major data release between now and the September Fed meeting. CPI reports. PPI. Next month’s jobs number. Any of those coming in hotter than expected brings rate hike odds back up and gold faces selling pressure again. Any further softness in the data extends this week’s recovery.
Markets are closed Friday for Independence Day. Traders get a long weekend to sit with this week’s numbers. Jobs miss. Rate odds down. Gold up. Tesla beat and fell. Dow record. SpaceX near IPO price. Lot to digest before next week starts.
Gold had the best week it has had in over a month. Whether that continues depends entirely on what the next batch of economic data says about where the Fed needs to go.