Gold subdued as strong US jobs report lifts aggressive Fed rate-hike bets

Gold prices edged lower on Monday after solid US jobs report last week boosted the prospect of aggressive interest rate hikes by the US Federal Reserve, lifting the dollar and Treasury yields. Spot gold was down 0.1 per cent at $1,772.27 per ounce, as of 0303 GMT, after dropping 1 per cent in the previous session.

US gold futures eased 0.1 per cent to $1,790. “Gold off to a tranquil start as the market is still digesting the implication of the bumper US jobs reports and to what extent it will influence the Fed,” said Stephen Innes, managing partner at SPI Asset Management. “I think the July surge in non-farm payroll employment raises the odds of a third 75 basis-point rate hike in September, which should be negative for gold.”

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Traders currently see a 73.5 per cent probability, the Fed continues the pace of 75-basis-point rate hikes for its next policy decision on September 21 to tame soaring inflation after US job growth unexpectedly accelerated in July. Stunning US payrolls report pushed against talk of recession and lifted the dollar index to its highest since July 28, making gold more expensive for other currency holders. While benchmark US 10-year Treasury yields hovered near their highest level in more than two weeks scaled on Friday.

The Fed should consider more 75bp interest rate hikes at coming meetings in order to bring inflation back down to the central bank’s goal, Fed Governor Michelle Bowman said on Saturday. Although gold is seen as a hedge against inflation, rising US interest rates dull bullion’s appeal. Focus this week will be on US inflation data due on Wednesday that could offer more clues on Fed rate hike path.

Meanwhile, holdings of SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, fell 0.12 per cent to 999.16 tonnes on Friday, its lowest since mid-January. Spot silver was flat at $19.87 per ounce, platinum fell 0.2 per cent to $929.96, and palladium edged 0.1 per cent lower at $2,123.94.