Weaker labor market data overshadowed Thursday’s higher-than-expected US consumer inflation reading and raised bets for more aggressive policy easing by the Federal Reserve (Fed). This, in turn, kept the US dollar (USD) pressured near its lowest level since July 24 and benefited the non-yielding yellow metal. The U.S. Bureau of Labor Statistics (BLS) reported that the headline Consumer Price Index (CPI) rose by a seasonally adjusted 0.4% in August, pushing the annual inflation rate to 2.9% from 2.7% in July. Meanwhile, the core index, which excludes volatile food and energy prices, rose 0.3% for the month and 3.1% year-on-year in August, in line with the previous month and consensus estimates.

However, higher-than-expected US consumer inflation figures were offset by a rise in weekly US Initial Jobless Claims to their highest level since October 2021. This came on top of Friday’s weak US Nonfarm Payrolls report and provided further evidence of a weakening labor market, which, in turn, bolsters the case for more aggressive policy easing by the Federal Reserve and supports gold.
The market is now almost fully pricing in three interest rate cuts for the remainder of the year. According to the CME Group’s FedWatch Tool, traders see a 100% chance of a 25 basis point rate cut at next week’s FOMC meeting and are forecasting two more rate cuts in October and December. This pushed the 10-year US Treasury yield to a five-month low and the US dollar to its lowest level since July 24.
The British daily Financial Times reported that the US administration of Donald Trump will pressure the G7 countries to impose significantly higher tariffs on India and China for buying Russian oil in an effort to force Moscow into peace talks with Ukraine. Additionally, Japan’s Trade Ministry announced on Friday that the country would impose additional export restrictions on several foreign entities as part of sanctions against Russia.