Gold falls 1% as strong US payrolls data douses rate cut hopes

Gold fell 1% on Thursday as stronger-than-expected US payroll data cemented expectations that the Federal Reserve is unlikely to cut interest rates as early as previously anticipated, denting the metal’s appeal.

Spot gold fell 0.9% to USD 3,328.63 per ounce as of 0200 p.m. EDT (1800 GMT), after falling over 1% earlier in the session.

US gold futures settled 0.4% higher at USD 3,342.9.

The dollar and US stock index futures rose after non-farm payrolls increased by 147,000 jobs last month, the Labor Department’s Bureau of Labor Statistics showed. Economists polled by Reuters had forecast payrolls rising 110,000.

A stronger dollar makes bullion more expensive for overseas buyers.

“The better than expected jobs number means we see a lesser likelihood of a Fed rate cut earlier than currently anticipated. As a result, the dollar strengthened, which is adding pressure to the gold market,” said David Meger, director of metals trading at High Ridge Futures.

“The key is the fact that the idea or possibility of a July rate cut is off the table.”

Investors are now pricing in 51 basis points of Federal Reserve rate cuts by the end of the year, starting in October, down from around 66 basis points expected prior to the report.

Non-yielding gold tends to perform well in a low-interest-rate environment.

On the trade front, an agreement between the United States and Vietnam was announced on Wednesday ahead of a July 9 deadline when US tariffs are set to take effect.

Meanwhile, Republicans in the US House of Representatives advanced Trump’s massive tax-cut and spending bill, estimated to potentially add USD 3.4 trillion to the nation’s debt, toward a final yes-or-no vote.

“As the indebtedness of the US continues to grow, investors might become more concerned about the US dollar, which should benefit gold in the longer-term,” said Carsten Menke, an analyst at Julius Baer.

Spot silver was up 0.7% at USD 36.84 per ounce, while platinum lost 3.1% to USD 1,374.89 and palladium shed 1.5% to USD 1,137.69.

(Reporting by Anushree Mukherjee in Bengaluru; Additional reporting by Sarah Qureshi; Editing by Philippa Fletcher, Tasim Zahid, and Cynthia Osterman)