Jobs Data Misses the Mark: All Eyes on Sept Fed Meeting

Wall Street is counting on the Federal Reserve to cut interest rates at its upcoming September 18 meeting. The question is how big will that rate cut be—25 or 50 basis points?

The latest U.S. jobs data came in weaker-than-expected by a smidge, showing further signs the labor market is cooling. But, it appears to be a coin toss on whether this will push the Fed to cut rates in a bigger way this month.

No matter the size, the start of a new interest rate cutting cycle is positive for gold.

Looking at the jobs data, hiring has slowed from earlier this year. In August, non-farm payrolls rose by 142,000, the Labor Department said last week. However, that missed the mark of the 160,000 new jobs that economists had expected. The sectors which generated the most new American jobs in August included the hospitability sector with 34,000 new jobs, health care at 31,000 new jobs and construction with 34,000 new jobs.

Meanwhile, the overall unemployment rate edged down to 4.2% in August from July’s 4.3% reading—which was a sigh of relief to economists.

The verdict? The jobs report was a mixed bag.

Job growth was weaker-than-expected, but the drop in the unemployment rate was a slight positive. Investors who have been banking on a 50 basis point interest rate cut didn’t see the fuel from that report needed to push the Fed to definitively cut rates by that large of an amount.

Gold dipped modestly lower following the jobs report, but investors quickly used the price dip to buy more gold. Declines were limited and short-lived. Gold is trading just shy of its all-time record high at above $2,500 an ounce.

So whether the Fed cuts interest rates by 25 or 50 basis points it may not matter that much because a new trend is beginning for gold. Lower interest rates reduces the opportunity cost of owning gold, which will help increase the already heightened demand for the precious metal we’ve seen this year. The Fed is on the cusp of starting an interest rate cutting cycle that could help propel gold toward $3,000 over the next year. If you see any dips in gold, don’t wait too long to use them to accumulate precious metal. Dips aren’t lasting long in today’s market environment and before you know it gold may be sitting with a $3 and not a $2 at the beginning of its value.

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