Gold Down 3rd Week in Row as U.S. Jobs Suggest More Painful Fed Hikes

By Barani Krishnan

Investing.com -- There are just about three weeks left to the next Federal Reserve decision on rates. Yet it may feel like the longest three weeks to gold bulls who have seen only red almost day after day of recent trading.

The benchmark gold futures contract on New York’s Comex, December, settled Friday’s trade down $13.30, or 0.8%, at $1,722.60 per ounce. Prior to that, it was down five sessions in a row, after its last positive close of $1,771.40 on August 25.

For the current week itself, December gold was down 1.6%, adding to the back-to-back slide of 0.7% and 2.9% in the last two weeks. Gold futures have also fallen six months in a row since its last positive close of $1,954 in January, losing almost 12% in that stretch.

Worse than futures was the spot price of bullion, which is more closely followed than futures by some traders. Spot gold was up $12.14, or 0.7%, to trade at just $1,709.78 by 16:00 ET (20:00) on Friday.

Gold’s rebound for Friday came after the U.S. Labor Department reported a slightly higher-than-expected unemployment rate for August in its non-farm payrolls report, despite citing more new jobs for the month than forecast by economists.

Despite that, Investing.com’s Fed Rate Monitor Tool assigned a 65% chance that the Fed will impose a third straight rate hike of 75 basis points when its Federal Open Market Committee, or FOMC, votes at its Sept. 21 decision on rates.

The FOMC is determined to beat inflation stubbornly hovering not far from four-decade highs. Inflation, as measured by the Consumer Price, peaked at 9.1% per annum in June before slowing to just 8.5% in July.

The Fed’s target for inflation is a mere 2% a year and it has vowed to raise interest rates as much as necessary to achieve that. Rate hikes are anathema to gold, which some of the biggest investors buy as a hedge against inflation.

“Gold is breathing a huge sigh of relief” after the August jobs numbers that helped it close above the previously broken support of $1,700, said Craig Erlam, analyst at online trading platform OANDA.

But he noted that as far as the Fed was concerned, “there's been such an effort to put 75 basis points on the table in recent weeks [that] to change their mind on the back of this [jobs report] would seriously undermine their guidance in future"