Wall Street is extremely bullish on gold as disappointing jobs data, tariff turmoil boost chances of a September rate cut

NEW YORK (August 1) After a relatively quiet summer, disappointing labor market data has breathed new life into the gold market, and Wall Street bulls are starting to run wild.

With gold prices ending the week at critical near-term resistance at $3,350 an ounce, sentiment among market analysts is as high as it can be, according to the Kitco News Weekly Gold Survey.

Unfortunately, due to a technical issue, Kitco News was unable to run its social media Main Street Poll.

The shift in sentiment has been fairly swift, as the precious metal started the week on the back foot, seeing some selling pressure after economic data showed the U.S. economy grew by 3% in the second quarter. However, some economists dismissed the latest GDP data, noting it remains sensitive to extreme trade fluctuations.

Adding to the bad news for gold, on Wednesday, the Federal Reserve left interest rates on hold, and Fed Chair Jerome Powell even cast doubt on potential rate cuts in September.

“We have made no decisions about September,” Powell said during the press conference following the central bank’s decision.

However, heading into the weekend, analysts noted that Powell’s comments felt a little dated, as July U.S. nonfarm payrolls data significantly disappointed market expectations.

According to the Bureau of Labor Statistics, the economy created only 73,000 jobs last month. At the same time, total job growth in May and June was revised down by 258,000. Based on the revised data, only 14,000 jobs were created in June and 19,000 in May.

The disappointing employment data single-handedly put rate cuts back on the table in September, breathing new life into gold.

“It is clear that the jobs market in the U.S. is far from the ‘solid’ that Fed Chair Jerome Powell asserts, and today’s government jobs data is one more illustration of that,” said Adrian Day, President of Adrian Day Asset Management. “Given that the ‘solid’ jobs market was the main pillar on which Powell was resting his case for not cutting rates this week, the report adds significantly to the pressure to cut in September. So, after two weeks of softness in the gold price, we look for higher prices in the week ahead.”

This week, 17 market analysts participated in the gold survey—and nobody cast a bearish vote.

David Morrison struck a neutral tone, saying the employment data was bullish for gold, but he doesn’t see prices breaking out of their range anytime soon.

“Despite today’s move, gold continues to be rangebound, and it will probably take a period of ‘back and fill’ before it has the momentum to break back above $3,400 again—let alone hold this level on pullbacks. We must bear in mind that today’s surge comes on the back of an extraordinary reversal in the U.S. dollar’s fortunes. And that move itself was triggered by an unexpectedly poor Non-Farm Payroll number. While that has increased the probability of a September rate cut, let’s not forget this is just one number, together with a downward revision, in a notoriously volatile series,” he said.

However, Morrison also noted solid bullish technicals for gold, as daily momentum indicators have reset from overbought levels. “This means that there’s plenty of scope for upside momentum to build from here.”

Beyond disappointing economic data, some analysts also remain bullish on gold as it continues to serve as an attractive safe haven and a critical global monetary asset, particularly as U.S. President Donald Trump unleashes elevated import tariffs on the world.

While trade deals with Japan and Europe last week—which will see those import fees rise by 15%—eased some global trade uncertainty, nations like Canada that have not yet finalized a deal face elevated tariffs of 35% as August kicks off. Meanwhile, Indian imports face a 25% increase, Taiwan will see its exports taxed at 20%, South African products face a 30% tariff, and Switzerland 39%, just to name a few examples.

“Tariffs mean nations will do fewer trades with U.S. dollars, so I would expect gold will continue to do well as the world looks for another monetary asset,” said Chris Vecchio, Head of Futures Strategies and Forex at Tastylive.com.

“Gold has had a tough few weeks as the U.S. dollar rebounds and short positioning untangles, but this may have been the antidote that gold needed to get its shine back,” he said.

Darin Newsom, Senior Market Analyst at Barchart.com, said he is bullish on gold due to geopolitical uncertainty driven by President Trump’s ongoing trade war.

“From a technical point of view, the more heavily traded December contract moved into a short-term uptrend early Friday. Why? The easiest answer is it’s a new month, meaning new threats of tariffs from the U.S. president. What will come of this? It depends on how other headlines regarding the president play out. If the news gets worse on other fronts, his trade threats will get more outlandish in an attempt to redirect attention. The bottom line is gold should continue to find buying interest as a safe-haven market,” he said.

As to how much room gold has heading into next week, Marc Chandler, Managing Director at Bannockburn Capital Markets, commented:

“U.S. jobs data and the subsequent precipitous drop in U.S. rates and weaker dollar have likely helped put the bottom in gold. A move above $3,375 will retarget the $3,440 area. The market is more confident of a September cut and another in Q4,” he said.

KitcoNews