Gold prices fell slightly as investors assessed stronger US employment data. At the same time, markets prepared for key US inflation figures due later this week.
Spot gold fell 0.5% after Asian markets opened. The price reached $4,405 per ounce. Gold had already dropped 1% on Friday.
US gold futures for December delivery also fell 0.5%. The contracts traded at around $4,452 per ounce.
Friday’s data showed faster US employment growth in August. Meanwhile, the unemployment rate remained steady at 4.1%.
The stronger labor market could give the Federal Reserve more reason to consider higher interest rates. However, investors still lack a clear signal about the Fed’s next decision.
Markets now await the latest US inflation data. The Producer Price Index (PPI) will arrive on Thursday. The Consumer Price Index (CPI) will follow on Friday.
These reports could provide a clearer picture of the Federal Reserve’s monetary policy outlook.
Tim Waterer, chief market analyst at KCM Trade, said the employment figures surprised markets positively. He noted that the data increased pressure on gold.
However, Waterer said the jobs report did not fully settle expectations for a rate hike in September. He identified US inflation data as the missing piece for investors.
Higher inflation could increase expectations for tighter US monetary policy. Consequently, stronger inflation could push Treasury yields higher.
Higher yields can put additional pressure on gold prices. Gold does not generate interest income, so higher rates can make interest-bearing assets more attractive.
According to the CME FedWatch Tool, traders currently see a 58.4% probability of a US rate hike at the Federal Reserve’s September 15-16 meeting.
Investors will therefore focus closely on Thursday’s PPI data and Friday’s CPI report.
Gold often attracts investors as a hedge against inflation and economic uncertainty. However, higher interest rates can reduce its appeal.
US President Donald Trump also added another source of uncertainty on Friday. He said the United States could stop trade with countries that maintain trade surpluses with the US if the Federal Reserve does not cut interest rates.
The comments came as investors continued to monitor US monetary policy and global economic risks.
Meanwhile, tensions in the Middle East remain another factor for financial markets.
Iran said it would strengthen efforts to address economic challenges linked to US sanctions. A senior Iranian official also warned of a strong response if Iran faces further attacks.
Investors will continue watching inflation, interest rates and geopolitical developments. Together, these factors could determine the next major move in gold prices.
