The gold price surged significantly on the spot market at the end of last week, briefly reaching the level of $3,600 per ounce. It is currently trading only marginally below that. The catalyst for the rise was US labor market data, which proved even weaker than expected.
US Labor Market Continues to Slide, Gold Benefits
The August report dealt another blow to the already weak labor market in the United States: Instead of the expected 75,000, only 22,000 new jobs were created. Previously, the gains for the two preceding months had been revised downwards by 258,000; for July, only 73,000 new jobs were reported. At the same time, the unemployment rate climbed to 4.3%. The three-month average from May to August fell to 29,000 jobs, after an already meager 35,000 until July – fueling recession fears.
US Labor Market Continues to Slide, Gold Benefits
With this negative development, pressure is mounting on the Federal Reserve to act on September 16/17. A 25 basis point interest rate cut is practically a given in the market, with some participants even expecting 50 points.
Fed Chair Jerome Powell had outlined a wait-and-see approach at the Jackson Hole meeting on August 23 – with an emphasis on data dependency. Given the faster-than-expected slowdown in momentum, this tone is likely to change now. From our perspective, the combination of weaker job growth, higher unemployment, and uncertainty creates fertile ground for a more decisive easing of US monetary policy – and supports persistently high gold prices as a proven hedge against economic turbulence and currency devaluation.
