Key Takeaways
- Gold prices surged to a fresh record high of nearly $3,600 per ounce, driven by a weaker-than-expected U.S. jobs report that solidified expectations for a Federal Reserve interest rate cut later this month.
- BMO Capital Markets now anticipates a Bank of Canada rate cut in September, a shift in outlook as the Canadian economy grapples with significant contraction and ongoing trade tensions.
- The U.S. labor market showed considerable weakness in August, with only 22,000 jobs added and a year-to-date loss of 78,000 manufacturing jobs, pushing the unemployment rate to 4.3%, its highest since 2021.
- Former President Donald Trump is reportedly considering policies to block U.S. tech companies from outsourcing jobs to India, emphasizing a focus on domestic job creation.
- COVID-19 infections are growing or likely growing in 30 U.S. states, with California experiencing a notable late-summer surge, including doubling test positivity rates.
Gold Hits Record High as US Jobs Data Weakens
Gold prices soared to a fresh all-time high on Friday, with spot gold rising to approximately $3,581.07 per ounce and touching a record of $3,597.80, while December gold futures reached $3,637.42 per ounce. This rally was primarily fueled by a softer-than-expected U.S. jobs report for August, which significantly increased market expectations for a Federal Reserve interest rate cut in September. The U.S. economy added a languid 22,000 nonfarm payrolls in August, falling well below economists' projections of 75,000. This weak employment growth, coupled with the unemployment rate rising to 4.3%—its highest level since 2021—reinforced views of a cooling labor market and a dovish shift from the Fed.
Traders are now pricing in a nearly 100% chance that the Fed will slash rates by 25 basis points at its September 16-17 meeting, according to CME's FedWatch Tool. The dollar lost ground, and Treasury yields retreated, further boosting the appeal of non-yielding bullion as a safe-haven asset.
Bank of Canada Rate Cut Expectations Intensify
In Canada, BMO Capital Markets has revised its forecast, now expecting the Bank of Canada (BoC) to cut interest rates in September. This comes as the Canadian economy contracted by 1.6% on an annualized basis in the second quarter, marking the steepest drop since the pandemic and significantly worse than the -0.7% average estimate. The contraction was largely attributed to a 7.5% fall in exports to the U.S. between April and June, exacerbated by ongoing trade tensions. While some economists from BMO previously saw a "high bar" for a September cut due to persistent core inflation, the latest economic data appears to have shifted the consensus. Desjardins Securities also maintains its forecast for a September rate cut, citing the significant miss on Q2 GDP estimates and a lack of momentum in the third quarter.
US Labor Market Struggles and Manufacturing Job Losses
The U.S. labor market continues to show signs of distress beyond the overall weak August jobs report. The manufacturing sector, in particular, has faced significant headwinds, losing 12,000 jobs in August alone and a total of 78,000 manufacturing jobs so far this year. This decline comes despite promises of a factory resurgence, indicating that current policies have not yet delivered the desired boost to domestic manufacturing. Other sectors also experienced job losses, with professional and business services shedding 17,000 jobs and the federal government losing 16,000 jobs in August.
Trump Considers Blocking Tech Outsourcing to India
Former President Donald Trump is reportedly exploring measures to prevent U.S. tech giants from outsourcing jobs to India. During an AI Summit in Washington in July, Trump delivered a directive to Silicon Valley leaders, stating that "the days of… hiring workers in India are over." He criticized the "globalist mindset" of companies like Google (GOOGL), Microsoft (MSFT), and Apple (AAPL), urging them to prioritize American job creation. This stance is part of a broader "America First" policy aimed at bringing jobs and innovation back to U.S. soil.
Rising COVID-19 Infections Across the US
The Centers for Disease Control and Prevention (CDC) reports that COVID-19 infections are growing or likely growing in 30 U.S. states. California is experiencing a notable late-summer surge, with test positivity rates doubling statewide to 12.07% for the week ending August 23, compared to late July. Wastewater data also indicates "high" levels of coronavirus in California, and emergency department visits for COVID-like illnesses are increasing in several counties. This rise is attributed to increased social gatherings over the Labor Day weekend and the return of children to school.
Other Market Movements
The Federal Open Market Committee (FOMC) has announced its tentative meeting schedule for 2027, with the first meeting slated for January 26-27. In the energy sector, the US Baker Hughes Rig Count increased by one to 537 for the week ending September 5, with rotary oil rigs at 414 (up from 412) and rotary gas rigs at 118 (down from 119). Additionally, 15 counterparties took $20.997 billion at the Fed's reverse repo operation, an increase from the previous $20.128 billion with 17 bids.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.