Gold Surges to Historic Highs Driven by Weak U.S. Labor Market and Interest Rate Cut Expectations

Gold prices in local markets saw a slight decline during Saturday’s trading, coinciding with the weekly closure of global exchanges. This followed the global gold ounce reaching an all-time high, achieving strong weekly gains of 4%, driven by weaker-than-expected U.S. labor market data, according to a report from the “iSAGHA” platform.

Saeed Embabi, Executive Director of the “iSAGHA” online gold and jewelry trading platform, stated that gold prices in local markets dropped by approximately 10 Egyptian pounds compared to Friday’s closing. The price of 21-karat gold recorded 4,860 EGP per gram, while the global ounce continued its weekly rise, closing at $3,587, up by about $140 during the week. On Friday, it touched $3,600, marking its highest level in history.

He added that 24-karat gold recorded 5,554 EGP, 18-karat gold reached 4,166 EGP, 14-karat gold hit around 3,240 EGP, and the gold pound rose to 38,880 EGP.

During Friday’s trading, local markets saw a notable increase, with the price of 21-karat gold rising by about 50 EGP. It opened at 4,820 EGP and closed at 4,870 EGP. Globally, the ounce increased by $37, starting the day at $3,550 and touching the historic high of $3,600 before settling at $3,587.

U.S. Jobs Data Pushes Gold to Historic Levels

Global gold prices surged sharply after the ounce hit $3,600 on Friday, following the release of the U.S. non-farm payrolls report, which showed weaker job growth and a rise in unemployment, with wage growth remaining steady. This led to a decline in the U.S. dollar and renewed bets on the Federal Reserve resuming interest rate cuts.

The yield on two-year U.S. Treasury bonds fell by 11 basis points to 3.48%, while the U.S. dollar index dropped by 0.70% to 97.57, amid growing investor demand for gold as a safe-haven asset.

Federal Reserve Expectations and Market Concerns

These developments come amid increasing concerns about the Federal Reserve’s independence, particularly following President Trump’s attempt to dismiss Governor Lisa Cook, which added pressure on the dollar and boosted investor appetite for gold.

Meanwhile, analysts at Standard Chartered Bank predicted a 50-basis-point interest rate cut in September, citing weak employment data over recent months and expectations of downward revisions to data from April 2024 to March 2025.

Anticipation for Inflation Data

Market participants are now focused on the upcoming release of the U.S. Consumer Price Index (CPI) data next week, which will play a pivotal role in shaping the Federal Reserve’s interest rate policy during its September 16-17 meeting. If the data shows further slowing of inflation, the likelihood of an interest rate cut will increase, potentially pushing gold to new record highs.

U.S. Labor Market: Clear Slowdown

The U.S. Bureau of Labor Statistics reported that the economy added only 22,000 jobs in August, compared to expectations of 75,000 jobs and significantly lower than the upwardly revised 79,000 jobs in July. Meanwhile, wage growth remained steady at 0.3% month-on-month, while the unemployment rate rose to 4.3% from 4.2% in the previous month.

Market Expectations for Interest Rates

Based on this data, Fed funds futures for December 2025 indicate expectations of a 68-basis-point interest rate cut by year-end. Markets are pricing in an 86% probability of a 25-basis-point cut at the September meeting, with only a 14% chance of a larger 50-basis-point cut.

Meanwhile, U.S. Treasury yields continued to decline, with 10-year bonds falling by more than 8.5 basis points to 4.076%. Real yields, adjusted for inflation expectations, dropped by about 9 basis points to 1.696%.

Embabi emphasized that gold is at a critical juncture. The combination of a weak U.S. labor market, a declining dollar, and growing concerns about the Federal Reserve’s independence makes gold the preferred choice for investors seeking safety. Locally, despite the temporary decline, the global upward trend is likely to continue pressuring the Egyptian market, potentially keeping gold prices elevated in the near term.