Gold drops from near-record level as US jobs data blurs rate outlook

Gold prices eased on Friday, retreating from near-record levels reached earlier, after mixed U.S. jobs data cast doubts on the scale of interest-rate cut from the Federal Reserve this month.

Spot gold fell 0.3% to $2,509.35 per ounce by 10:21 a.m. ET (1421 GMT), having hit their highest since Aug. 20, when gold last scaled a record peak. U.S. gold futures eased 0.2% to $2,538.90.

“The picture is muddy though as the unemployment rate retreated and average hourly earnings ticked up. This won’t give the market clarity on the size of September’s rate cut,” said Tai Wong, a New York-based independent metals trader.

A Labor Department report showed non-farm payrolls rose by 142,000 in August, compared with estimates of 160,000, as per economists polled by Reuters. July numbers were also revised down to 89,000.

However, the unemployment rate stood at 4.2%, in line with expectations, but down from 4.3% a month earlier. “Investors are now completely unsure whether the Fed will opt for 25 or 50 basis points rate cut. U.S. CPI next week is the last major release before the FOMC’s meeting on Sept. 18, and this may well be the deciding factor,” said Fawad Razaqzada, market analyst at Forex.com Following the data, the chances of a 25-basis-point (bp) reduction by the Fed this month came down to 59% from about 70% a week earlier, while those of a bigger 50-bp reduction rose to 41% from 30% last week, according to the CME FedWatch tool. Fed New York President John Williams said August hiring data was not a surprise given what he expects from the economy right now and lowering rates soon will be about helping keep the job market balanced.

Lower interest rates reduce the opportunity cost of holding the zero-yield bullion.

Elsewhere, spot silver fell 0.6% to $28.65.

Platinum gained 0.5% to $929.00 while palladium fell 0.2% to $938.75.