Rate hikes, not cuts: what a hawkish Fed means for gold

The biggest thing standing in gold’s way this week is not a lack of buyers. It is the Federal Reserve. Markets are pricing a rate rise in December, and Friday’s jobs report made that bet stronger. CNBC puts the odds at 79%, up from 71% before the data. investingLive puts them at about 80%, up from about 70%.

The jobs report

TheStreet Pro reports that the US added 165,000 jobs in October, above every one of the 79 estimates in Bloomberg’s survey. The highest estimate was 131,000 and the consensus 62,000. Revisions added another 84,000 to the previous two months.

As reported by TheStreet Pro on 6 November. Consensus surveys differ slightly: FinanceFeeds gives about 65,000 expected.

FinanceFeeds, citing other reports, says gold fell about 1% on Friday after the data, with the dollar index up about 0.7% and the 10-year Treasury yield near 4.87%. Strong jobs and firm wages give the Fed room to keep tightening, and gold tends to struggle when they do.

Why the odds differ

Each figure was taken at a different moment, and they move through the day. The direction is what they share.

A hike is a different backdrop from the rate cuts gold bulls usually hope for. We looked at that question in Can gold rally while the Fed is still hiking?, and gold’s 5% gain last week, reported by CNBC and investingLive, came with those odds already high. CNBC ties Monday’s further rise to falling oil (see Why cheaper oil is gold’s new best friend), not to any retreat by the Fed.

CPI on Tuesday

investingLive calls Tuesday’s consumer price report the next test for December hike pricing. The release is at 8:30 a.m. ET on 10 November, with producer prices on Friday 13 November, according to FinanceFeeds. It cites RBC Economics as expecting 0.3% on the month for both headline and core, and the Cleveland Fed’s nowcast at 0.24% overall and 0.21% core as of 6 November.

Tim Waterer of KCM Trade told CNBC that any hot readings “would likely firm the dollar and lift the odds of a December rate hike,” which he said would quickly put gold back on the defensive. There is a recent precedent: September’s CPI, published on 14 October, knocked gold below $4,100.

Those are other people’s estimates and readings. This site does not forecast the data or the price, and nothing here is advice. The gold price page carries the current figure.

Every figure here is as reported by the publications listed under Sources, at the time they reported it. Prices move; the live gold price has the current one. Nothing on this page is investment advice.