Key Highlights

• Gold prices jumped 2.30 percent above 4,124 dollars per ounce, rebounding from an eight-month low.

• June nonfarm payrolls rose by just 57,000, well below the 110,000 forecast and the fewest in four months.

• Fed funds futures now price in less than a 50 percent chance of a September rate hike, down from 67 percent before the jobs report.

• Easing oil prices tied to progress in Strait of Hormuz shipments further supported gold by softening inflation concerns.

Weak Labor Data Triggers Sharp Rebound

Gold prices jumped above 4,100 dollars per ounce on Thursday, rising 2.30 percent and rebounding sharply from an eight-month low, as markets rapidly scaled back expectations for further Federal Reserve rate hikes. The catalyst was a weaker-than-expected June jobs report, which showed the US economy added just 57,000 jobs, the fewest in four months and well below the 110,000 consensus forecast.

The labor market weakness was broad-based, with leisure and hospitality shedding 61,000 jobs despite a tourism boost tied to the World Cup. The unemployment rate unexpectedly fell to 4.2 percent, though this decline was attributed to workers leaving the labor force rather than stronger hiring, while wage growth edged up to 3.5 percent year over year.

Rate Hike Expectations Shift Sharply Lower

The weak jobs data prompted a significant repricing in interest rate expectations. Fed funds futures now show less than a 50 percent probability of a September rate hike, down sharply from 67 percent priced in before the report's release. This shift reflects markets reassessing the likelihood that the Federal Reserve will need to tighten policy further given signs of labor market cooling.

The repricing followed comments a day earlier from Fed Chair Kevin Warsh, who acknowledged easing inflation expectations while reaffirming the central bank's continued commitment to price stability. Lower expected rates typically benefit gold, since the metal does not yield interest and becomes relatively more attractive when the opportunity cost of holding it declines.

Easing Oil Prices Add Further Inflation Relief

Gold's rally was reinforced by developments in oil markets, where increased shipments through the Strait of Hormuz and progress in indirect US-Iran talks pushed crude prices lower. This decline in energy costs further eased broader inflation concerns, compounding the rate-hike expectation shift triggered by the jobs report.

The combination of weaker labor data and falling energy prices could continue supporting gold if it reinforces market expectations for a more dovish Fed policy path. However, gold's rebound from an eight-month low suggests the metal had priced in considerably more hawkish expectations previously, meaning further gains may depend on additional confirming economic data in the weeks ahead rather than a single report alone.

Conclusion

Gold's sharp rebound reflects a rapid market reassessment of Federal Reserve policy expectations following unexpectedly weak June employment data. The simultaneous easing in oil prices has reinforced this dynamic by reducing near-term inflation concerns, creating a supportive backdrop for the metal. Whether this rally extends further is likely to depend on whether subsequent economic data confirms the labor market softening suggested by June's report.