Gold breaches $3,600 after US NFP report

Today’s headlines

What’s happening: Gold prices rose sharply on Friday, following the release of the US jobs report for August.

What happened: Gold hovered near record highs after weaker-than-expected NFP figures sparked speculations of interest rate cuts by the Federal Reserve.

Weakness in the US dollar provided further support to gold during Friday’s session.

Why it matters: Data released on Friday showed that the US economy added only 22,000 jobs in August, down sharply from 79,000 in July. The figure fell significantly short of market estimates of 75,000.

Excluding the pandemic, this marked the lowest monthly gain since 2010, when the US economy was overcoming challenges related to the subprime crisis.

The US unemployment rate rose to 4.3% in August, from 4.2% in the previous month. Although the figure was in-line with market projections, it was the highest unemployment level since 2021.

A slowdown in the labour market triggered speculations of the Fed cutting its benchmark interest rates by 25bps at its meeting later this month. Markets also widely expect the central bank to announce further rate cuts through the rest of 2025.

Gold prices also received support last week amid concerns over the Federal Reserve’s independence and increased political risks, after President Donald Trump ordered the removal of Fed Governor Lisa Cook.

Appeal for the safe-haven bullion generally increases with a decline in interest rates and high uncertainty.

Weakness in the US dollar also lent support to gold prices, as a softer greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.6% to 97.74 on Friday.

US gold for December delivery climbed 1.3% to close at $3,653.30 an ounce on Friday. For the week, gold prices climbed more than 3%, notching the best weekly performance in around four months. The yellow metal has jumped more than 37% year to date.

Among other metals, silver rose to $41.552 per ounce, recording gains for the third consecutive week. Platinum climbed to $1,386.7, while palladium closed lower at $1,128.90.

What to watch: Investors will continue monitoring the US dollar and comments from the Federal Reserve.

Markets await the release of data on consumer inflation expectations (1900 UAE Time) from the US today. US consumer inflation expectations for the year ahead, which accelerated to 3.1% in July from 3% in the previous month, are expected to remain at 3.1% in August.

The markets today

European stocks in focus today ahead of the ECB’s policy meeting this week

Context: Equity markets in the Eurozone settled lower on Friday as investors assessed the latest economic data.

Details: European stock markets fell on Friday, tracking the decline in US equities after downbeat labour data raised concerns over a slowdown in the world’s largest economy.

Data released on Friday showed Eurozone’s GDP grew by 1.5% year-over-year in the second quarter, higher than the preliminary reading of 1.4%. However, this marked a slowdown from the 1.6% expansion recorded in the previous quarter.

Eurozone’s economy expanded by 0.1% on a sequential basis in the second quarter, recording its weakest performance since the fourth quarter of 2023 and easing from 0.6% in the first quarter.

The number of employed persons in the Eurozone climbed by 0.1% to 171.594 million in the second quarter.

The STOXX Europe 600 Index fell 0.16% to close at 549.21 on Friday. The energy and financial sectors led the losses amid expectations of the Federal Reserve cutting interest rates this year.

London’s FTSE 100 fell 0.09% to 9,208.21, while Germany’s DAX 40 and France’s CAC 40 lost 0.73% and 0.31%, respectively.

What to watch: With no major economic data releases from the Eurozone today, investors await the European Central Bank’s interest rate decision on Thursday. The ECB held interest rates at its July meeting, after announcing eight rate cuts since last year, which resulted in borrowing costs falling to their lowest levels since November 2022. Markets widely expect the ECB to keep rates unchanged at its upcoming meeting.

Other Markets: US trading indices closed mostly lower on Friday, with the Dow Jones index and S&P 500 down by 0.48% and 0.32%, and the Nasdaq 100 up by 0.08%.

The news shaping the markets

Russia launched its biggest air attack in the war with Ukraine, destroying the main government building in central Kyiv. The news sent the RUB/USD pair higher in forex trading this morning.

Japan’s Prime Minister Shigeru Ishiba announced his resignation over the weekend, which exerted pressure on the JPY/USD forex pair.

Fitch Ratings lowered Poland’s credit outlook from stable to negative, sending the PLN/USD pair lower in forex trading this morning.

China’s foreign exchange reserves surged by $29.9 billion to $3.322 trillion in August, from $3.292 trillion in the previous month, lending support to the CNY/USD forex pair.

Vietnam’s foreign direct investment rose by 8.8% year-over-year to $15.4 billion from January to August, sending the VND/USD pair higher in forex trading this morning.

What else to watch today

France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), US 3-month Bill auction (1930 UAE Time), 6-month Bill auction (1930 UAE Time) and consumer credit change (2300 UAE Time), as well as Argentina’s industrial production (2300 UAE Time).