Gold and silver retreat as robust job growth fuels Fed rate hike bets

Nonfarm payrolls surged by 162,000 in August, outpacing analyst projections and signaling resilience in the labor market. This shift in momentum recalibrated Fed-hike pricing, moving it into the 60% to 65% range. Consequently, spot gold slipped 0.96% to trade near $4,429.40 per ounce, while spot silver dropped 1.21% to $66.040. The two-year Treasury yield climbed to 4.38%, marking its highest level since January 2025, as investors moved away from the "pause" narrative that had dominated trading earlier in the week.

While the precious metals complex remains under pressure from rising rates, geopolitical friction in the Strait of Hormuz continues to provide a floor for defensive demand. The ongoing conflict continues to disrupt global fuel flows, with diesel prices hitting a record $5.85 per gallon. This creates a volatile environment for gold: while energy-driven inflation strengthens the case for Fed intervention, the underlying supply-chain stress maintains a steady bid for safe-haven assets. Traders are now shifting their focus toward the upcoming PPI and CPI reports, which will serve as the next critical indicators for the Federal Reserve’s policy path.