162,000-job gain fuels Fed rate-hike bets, dragging gold lower

US employers added 162,000 jobs in August, nearly triple the 55,000 forecast, prompting traders to lift Federal Reserve rate-hike bets and sending gold lower as the metal's appeal faded.

The gain, reported Friday by the Bureau of Labor Statistics, followed an upwardly revised 21,000 increase in July and beat the median estimate in a Bloomberg survey, with private payrolls climbing 127,000 against a 50,000 forecast.

Hourly earnings rose 3.1 percent from a year earlier, the slowest annual pace since May 2021, while the unemployment rate held at 4.1 percent and labor force participation ticked up to 61.6 percent. June and July payrolls were revised higher by a combined 55,000 jobs.

The resilient labor market gives the Fed room to keep policy restrictive, and traders responded by pricing a more hawkish path, a shift that lifts Treasury yields and the dollar and weighs on gold, which pays no interest.

The gains were concentrated in leisure and hospitality, which added 62,000 jobs after a 21,000 decline, and government, up 35,000 following a 50,000 drop. The average workweek lengthened to 34.4 hours from 34.3, and the size of the labor force expanded as participation climbed from 61.4 percent.

The repricing marks a reversal of the easing bets that built through the summer as inflation cooled. Gold had climbed earlier this year on expectations of rate cuts; those gains have since been pared as traders pushed out the timing of any move, leaving the metal sensitive to each fresh reading on the labor market. Because bullion yields no income, its appeal tends to fade when rate expectations rise and competing assets such as Treasuries offer stronger returns.

The dollar's firmness after the report added to the headwind for gold, which is priced in the US currency, and the pressure extended across the precious-metals complex. The shift also ripples through rate-sensitive assets more broadly, even as equities drew support from evidence the economy can absorb higher borrowing costs.

The moderating wage figure offers the Fed some cover even as hiring surprises to the upside, a nuance that could temper how far the hawkish repricing runs. A slower pace of pay growth eases one source of inflation pressure, giving policymakers room to weigh the strength of the labor market against the trajectory of prices rather than respond to the payroll number alone.

The next test comes at the Fed's next policy meeting, with the inflation data due before it likely to determine whether the hawkish repricing holds. If price pressures stay contained, traders may walk back some of the rate-hike bets and give gold support; if inflation runs hot, further repricing could extend bullion's slide and deepen losses for investors who had positioned for a friendlier rate environment.

This article is for informational purposes only and does not constitute investment advice.