Gold eased on Monday after touching a seven-week high in the previous session, as investors banked profits and turned their attention to U.S. inflation data due later this week that could sway the Federal Reserve's next move on interest rates.
Spot gold fell 0.3% to $4,330.46 an ounce, after climbing to its highest level since June 17 on Friday on the back of the weaker-than-expected July jobs report. U.S. gold futures slipped 0.4% to $4,381.60. Other precious metals followed bullion lower: spot silver fell 0.2% to $63.45 an ounce, platinum lost 0.1% to $1,742.50, and palladium dropped 1.1% to $1,362.97.
Friday's rally was driven by the same Labor Department report that sent equities to records: a surprise 23,000-job contraction in July and steep downward revisions to May and June payrolls, which traders read as reducing the odds the Fed raises rates at its September 16 meeting. By Friday's close, the probability that the Fed holds rates steady next month had climbed to 56%, according to CME's FedWatch tool, up sharply from odds that had favored a hike just days earlier. Gold, which pays no yield and tends to benefit when rate expectations soften, extended its recent run before Monday's pullback.
Inflation data looms
Markets are now looking to the consumer price index, due Wednesday, and producer price figures on Thursday, for a clearer signal on the Fed's rate path. Softer-than-expected inflation readings could further bolster expectations that the central bank holds rates steady, or eventually cuts, providing additional support for gold, while a hotter print could revive the case for tighter policy and pressure bullion lower.
Analysts described Monday's dip as consolidation rather than a shift in sentiment, with gold expected to hold support above the $4,300 level in the near term. Middle East tensions, including the unresolved standoff over shipping through the Strait of Hormuz, remain a lingering risk factor that traders say has helped keep a floor under prices even as the metal's rally cools.
The moves in bullion mirror the broader recalibration playing out across asset classes since Friday's jobs data. Equities have rallied on hopes for a more accommodative Fed, while gold's advance reflects the same wager on lower real rates ahead, a trade that traders say could reverse quickly if this week's inflation figures come in hotter than expected.
