Gold hits $4,417 as US dollar weakens on lower Fed rate hike odds
In brief
- Spot gold rose 0.9% to $4,417.24 per ounce on August 17
- US dollar index fell to lowest point in over two months, approaching 100
- July nonfarm payrolls fell 23,000 jobs, missing 80,000 gain consensus
- September Fed rate hike probability dropped to 33% from 51.2%
- December gold futures climbed 0.8% to $4,473.70
Weak Jobs Data Triggers Rate-Hike Pullback
July nonfarm payrolls fell by 23,000 jobs, a stark miss against the consensus forecast of an 80,000 gain. The miss rattled expectations for monetary tightening. The unemployment rate held at 4.1%, providing little offset to the employment shortfall.
Inflation data offered modest relief. The July Consumer Price Index rose just 0.1% month-over-month, pushing the annual rate down to 3.4%. Core CPI, which strips out food and energy, increased 0.2% for the month and 2.5% year-over-year.
These figures reshaped Fed expectations dramatically. The probability of a September rate hike fell to 33%, down from 51.2% the prior month.
The Dollar-Gold Inverse
Lower rate expectations weigh on the dollar. Higher rate expectations typically strengthen the dollar, because global capital flows toward higher-yielding US assets. The reverse holds when rate cuts appear likely.
Gold's appeal also hinges on interest rates themselves. Gold pays nothing. No coupon, no dividend, no yield. When interest rates rise, the opportunity cost of holding gold goes up, since the money sitting in bullion could instead be earning returns in bonds or cash. Declining rate expectations flip this calculus.
What's Next
December gold futures climbed 0.8% to $4,473.70, signaling sustained strength in the forward curve. Fed meeting minutes, scheduled for release on August 19, will be parsed closely for any signals about policy direction. Following the July 2026 Federal Reserve meeting, the policy rate was maintained within the 3.50%–3.75% range, and the September FOMC meeting scheduled for September 15–16 will likely draw fresh scrutiny as markets reassess the timing of any eventual rate cuts.
