Gold reversed course on Friday and is headed for a weekly loss after strong US jobs data restored market expectations that the Federal Reserve will raise interest rates this month.
Spot gold fell as much as 2.2% to around US$4,376 ($6,072) an ounce before recovering some losses, while US gold futures recorded a similar decline to trade just above US$4,400 an ounce.
The move halts a two-day rally driven by shifting expectations over whether the Fed would tighten monetary policy at its mid-September meeting.
However, a stronger-than-expected August jobs report has tilted expectations back towards a rate hike.
Jobs report raises rate hike bets
US nonfarm payrolls increased by 162,000 in August following upward revisions to the previous two months, according to Bureau of Labor Statistics data released on Friday.
The jobs growth exceeded all estimates in a Bloomberg survey, while the unemployment rate held steady at 4.1%.
The figures suggest the US labour market remains resilient despite economic uncertainty stemming from the Iran war and elevated inflation.
Fed officials could view the report as strengthening the case for higher interest rates, which typically weigh on non-yielding gold, although next week’s consumer price index data is also expected to play an important role in the central bank’s September decision.
Traders responded by increasing bets on a rate hike, with markets pricing in around a 65% probability of a September increase, up from about 55% before the jobs report.
“Gold stumbles badly as a huge headline print, and an overall strong report, makes a September rate hike much more likely unless we get a weak CPI report,” independent analyst Tai Wong told Reuters.
Friday’s decline followed a 2% gain on Thursday after Fed Governor Christopher Waller said he would be willing to support keeping rates unchanged if inflationary pressures continued to ease.
Dollar offers some support
Gold has also received support from growing expectations of intervention in the Japanese yen, which have weighed on the US dollar.
The yen strengthened nearly 2% on Thursday, reversing a month of gradual declines, as expectations increased that the Bank of Japan could raise interest rates.
A weaker US dollar generally supports bullion by making the metal less expensive for buyers using other currencies.
However, Friday’s labour market data shifted investors’ attention back towards US monetary policy and the prospect of higher interest rates.
Fund managers return to gold
Despite the renewed pressure, some of the world’s largest money managers have been rebuilding their gold positions after this year’s price decline, betting that bullion’s longer-term investment case remains intact.
Amundi, Europe’s largest asset manager, has bought gold on expectations that prices will return to US$5,000 an ounce by the end of the year, according to Bloomberg.
Fund managers at Pictet Asset Management, Robeco Institutional Asset Management, and Fidelity International have also added to positions they reduced earlier this year during gold’s retreat from record highs.
“Gold is an asset that we consider to be cheap, a good hedge and reasonably liquid,” Amundi Investment Institute Head of Cross-Asset Strategy Lorenzo Portelli told Bloomberg.
Gold surged to an all-time high near US$5,600 an ounce in January following a rally fuelled by speculative capital, but has spent much of 2026 retreating from those levels.
Inflationary pressures stemming from the Iran war pushed bullion back towards US$4,000 an ounce in June before renewed buying emerged in early August.
Write to Jackson Chen at Mining.com.au
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