Gold prices jump 2.5% as weak US jobs data cools Fed hike bets

Gold prices climbed 2.5% on Thursday, rebounding from an eight-month low, as weaker-than-expected US jobs data pushed investors to scale back expectations for further Federal Reserve rate hikes.

Spot gold rose more than 2.5% to around $4,134 per ounce as of 1345GMT, while US gold futures also advanced. Silver tracked the rally in precious metals, jumping about 4.6% to $61.77 per ounce.

The gains came after the US economy added just 57,000 jobs in June, well below market expectations of 114,000 and marking a sharp slowdown from the previous month. The Bureau of Labor Statistics also revised April and May payroll gains lower by a combined 74,000.

The unemployment rate unexpectedly fell to 4.2%, from 4.3% in May, but the decline was driven partly by a drop in labor force participation, which fell 0.3 percentage points to 61.5%.

Leisure and hospitality employment declined by 61,000 in June, reflecting weaker-than-usual seasonal hiring despite expectations that tourism activity would provide support during the World Cup period.

Average hourly earnings rose 0.3% month-on-month to $37.64, bringing annual wage growth to 3.5%, according to the data.

Following the report, traders reduced bets on near-term Fed tightening, with market-implied odds of a September rate hike falling toward 50% from about two-thirds before the payrolls release.

Gold, which does not offer yield, typically benefits when expectations for higher interest rates weaken. A softer dollar also supported bullion by making the metal cheaper for holders of other currencies.

Fed Chair Kevin Warsh said Wednesday that inflation expectations had eased, while reiterating the central bank’s commitment to restoring price stability.

Lower oil prices added to the support for precious metals, as increased shipments through the Strait of Hormuz and signs of progress in indirect US-Iran talks helped ease inflation concerns tied to energy costs.