US Jobs Data Unexpectedly Disappoints, Gold Surges to a Seven-Week High, with US CPI Set to Be the Big Test This Week!
Against the backdrop of US July nonfarm payrolls falling far short of expectations, spot gold prices surged last Friday to a seven-week high, recording not only their largest weekly gain of the year so far, but also prompting a significant shift in market expectations for the Federal Reserve’s policy path.
The US July nonfarm payrolls report released last Friday completely disrupted the market’s previous trajectory. Data from the US Department of Labor showed that nonfarm payrolls in July not only failed to increase, but actually fell by 23,000, far below the market expectation of an increase of 80,000. Making matters worse, June’s figure was also sharply revised down to an increase of just 20,000. The result far exceeded the market’s most pessimistic expectations and immediately triggered a sharp repricing in the interest rate futures market.
The labor market has always been one of the core indicators the Federal Reserve uses to assess the health of the economy. Previously, the market generally expected that although the labor market was slowing, it remained resilient enough to support the Fed in continuing to raise rates in September. However, the negative nonfarm payrolls figure, combined with the significant downward revision, challenged the narrative of a soft landing for the economy. Following the release of the data, the interest rate futures market reacted rapidly. The two-year US Treasury yield fell 4.2 basis points to 4.245%, while the 10-year Treasury yield also declined 2 basis points to 4.649%. The US Dollar Index weakened simultaneously. The weaker US dollar and lower expectations for real interest rates directly opened up further upside potential for gold.
Gold rose by nearly $300 over the past week, with market sentiment clearly shifting from caution to optimism. UBS even issued a more bullish forecast in its latest report, expecting gold prices to rise to $5,000 per ounce in the first half of 2027. The introduction of this long-term target further strengthened market confidence in gold’s medium- to long-term bullish outlook.
In addition to domestic US economic data, the latest developments in Middle East geopolitical tensions also provided some support for gold prices. US officials revealed that negotiations between Iran and Oman have made progress, with the two sides potentially reaching an agreement on control of the Strait of Hormuz, allowing normal oil transportation to resume. Once the agreement is announced and implemented, the United States will lift its blockade on Iranian ports. This development is viewed as a key step toward a broader peace agreement and could help ease concerns over disruptions to energy supplies. The marginal easing of geopolitical risks would theoretically put some pressure on safe-haven demand for gold, but recently it has instead helped ease inflation concerns and reduce pressure for further Fed rate hikes, making it more supportive of gold prices.
Market Insight:
Gold has continued to rise on the 4-hour chart, while the MACD lines and volume bars are contracting above the zero line. The market has begun to reassess the Federal Reserve’s policy path, significantly increasing the appeal of gold as a zero-yield asset. This rally has come quickly and sharply, and some funds may choose to take profits. The key factor determining whether gold can continue moving higher remains the performance of inflation data.
