(Kitco Commentary) - Gold soared to unprecedented heights today following a disappointing jobs report that has all but guaranteed Federal Reserve interest rate cuts at this month's policy meeting. The precious metal's December futures contract surged $37.40 to close at $3,639.80 per troy ounce, marking a 1.04% daily gain and pushing gold to its highest value in history.
The rally extends a remarkable weekly performance, with December gold climbing $123.70 per ounce—a 3.52% increase—as mounting economic concerns drive investors toward safe-haven assets.
Labor Market Deterioration Accelerates
August's employment report delivered another blow to an already weakening job market, with employers adding just 22,000 positions—far short of the 75,000 economists had forecast. The dismal figure follows July's equally troubling report of 73,000 new jobs, while revisions slashed the previous two months' gains by 258,000 positions. Meanwhile, the unemployment rate ticked up to 4.3%.
"August's employment report confirmed that the labor market has headed off a cliff-edge," said Bradley Saunders, economist at Capital Economics.
The three-month average for job creation has plummeted to just 29,000 positions from May through August, down from an already weak 35,000 average through July. According to USA Today, this concerning trend has economists increasingly worried about a potential recession.
Rate Cut All But Certain
The deteriorating employment picture has cemented expectations for aggressive Federal Reserve action at the September 16-17 Federal Open Market Committee meeting. Market participants now view a quarter-point rate cut as virtually guaranteed, with some economists suggesting the possibility of a more substantial half-point reduction.
Federal Reserve Governor Christopher Waller has emerged as a vocal advocate for immediate action, delivering a succinct five-word message about the urgency of rate cuts: "Let's get on with it." Waller has repeatedly called for the central bank to begin lowering rates at the upcoming September meeting.
Samuel Tombs of Pantheon Macroeconomics noted that after July's weak jobs report, Federal Reserve Chair Jerome Powell acknowledged that "downside risks to employment are rising."
Powell's Evolving Stance
The latest data may signal a shift from the cautious approach Chairman Powell outlined at the Federal Reserve's Jackson Hole symposium on August 23. At that gathering, Powell emphasized the Fed's "wait and see" strategy, carefully balancing easing inflation pressures against concerns about labor market softening.
However, Powell also stressed the Fed's flexibility, indicating the central bank would "respond to new data as it is released rather than locking into a preset course." With employment conditions deteriorating more rapidly than anticipated, the chairman's tone may evolve significantly in the coming weeks.
The convergence of weakening job growth, rising unemployment, and persistent economic uncertainty has created the perfect storm for both aggressive monetary policy action and continued strength in gold prices—a traditional hedge against economic turbulence and currency debasement.
Wishing you as always, good trading,
