(Kitco News) - The gold market is surging higher as the U.S. economy lost jobs in July, significantly missing expectations. The Bureau of Labor Statistics said the economy lost 23,000 jobs in July, versus expectations for a gain of 85,000. The spot gold price last traded at $4,367.80 an ounce, up 3% on the day.
Gold prices are once again surging higher, climbing to $4,350 an ounce as the U.S. economy lost jobs last month, significantly missing expectations.
The Bureau of Labor Statistics reported on Friday that U.S. nonfarm payrolls fell by 23,000 in July. The jobs number missed consensus forecasts, as economists had anticipated job gains of around 85,000. This is the second contraction in the labor market this year.
Although the labor market contracted last month, the unemployment rate fell to 4.1%, down from June’s reading of 4.2%. Economists were expecting to see an unchanged reading. However, some analysts note that the unemployment rate is dropping as Americans start to leave the workforce.
The gold market is seeing significant buying momentum in its initial reaction to the disappointing labor market data. Analysts said gold investors are now anticipating that the Federal Reserve will be limited in raising rates this year, even in the face of persistent inflation fears, capping real yields.
Spot gold last traded at $4,363.70 an ounce, up nearly 3% on the day. The disappointing economic data has pushed gold prices into positive territory for the year.
Not only were jobs lost last month, but the report also downwardly revised the May and June numbers. The report said June’s employment data was revised down to 20,000, compared to the initial estimate of 57,000. At the same time, May’s numbers were revised lower to 63,000 jobs from the prior estimate of 129,000.
Along with weak headline data, the report also noted muted wage growth. Average hourly earnings increased by 0.1%, or 2 cents, last month to $37.62. Economists were expecting to see a 0.3% increase.
Bond markets continue to price in a rate hike in September. The CME FedWatch Tool shows markets see a roughly 50/50 chance of a rate hike in September. However, economists expect that expectations will start to be pared back as investors continue to digest the data.
“The US rate hike odds are simply smashed by the US NFP number, and anyone who has been thinking that rate hikes are coming has had a real reality check. The action and reflection of this are clearly shown in the gold price action, which has moved higher like a rocket,” said Waleed Said, Technical Analyst at GivTrade. “Basically, the data has brought good news for gold and for the markets, but for the Fed, this is another huge problem, especially when inflation is this high. The Fed Chairman now will have to do some serious thinking to keep inflation in check.”
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, described the employment report as a game changer for interest rate expectations.
“Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn’t the case,” he said. “Next week’s CPI release will be important – and if the data continues to come in higher than expected, it could raise the probability of a rate hike at the Fed’s next meeting – but today’s jobs numbers should be enough to keep the Fed on hold for at least another meeting, which all things being equal is a positive for the stock market.”
However, not all economists see the July data as disastrous. Bill Adams, Chief U.S. Economist at Fifth Third Commercial Bank, described the report as “wonkish,” as much of the job loss was in government employment and education.
“In the broader context, the July jobs report shows that job growth was slow in the middle of 2026, but the job market is still tightening due to a shrinking labor force. Ordinarily a drop in payrolls would make the Fed worry about growth momentum, but when they fall at the same time that the unemployment rate declines it’s more likely to be noise,” he said. “The July CPI release will influence the Fed’s September decision more than the month’s jobs report.”
