Gold Hits New Record while the Dollar Falls (08–12 September)

The dollar index fell to 97.7 on Friday as disappointing US labor data reignited expectations for multiple Fed rate cuts. Nonfarm payrolls rose by just 22,000 in August, while the unemployment rate climbed to 4.3%, its highest since 2021. Markets now expect the Fed to cut rates this month and deliver a total of three reductions in 2025.

The 10-year US Treasury yield dropped sharply to 4.10%, a five-month low, as investors sought safety. The steepening yield curve and mounting political risks added to demand for Treasuries.

Gold surged to a fresh record of $3,595 per ounce, rising nearly 3% on the week amid heightened rate-cut expectations and broader risk aversion. Silver climbed toward $41, driven by industrial demand and falling real yields.

Market Drivers and Catalysts

• Currencies: Dollar drops on weak payrolls; euro and yen advance; pound lifted by softer dollar
• Commodities: Gold at an all-time high; silver climbs on industrial strength
• Fixed Income: US yields plunge; German and UK yields retreat; Japan’s JGBs firm
• Macro events: US Nonfarm Payrolls, Unemployment Rate, Job Openings, Eurozone CPI
• Macro headlines: US labor market slowdown supports Fed cuts; ECB likely on hold; BoJ grows hawkish on wages

Fixed Income

• US: The 10-year Treasury yield fell to 4.10%, its lowest since April, after labor data confirmed economic softening. Nonfarm payrolls rose by only 22,000 in August, with unemployment reaching 4.3%. Markets now price in a 25 bps cut in September and three total cuts in 2025. The 30-year yield remained elevated on long-term inflation and fiscal risks.
• UK: The 10-year gilt yield eased to 4.66%, reversing earlier gains tied to fiscal concerns ahead of the Autumn Budget. Weak US data calmed markets, while BoE Governor Bailey signaled uncertainty about the timing of rate cuts.
• Japan: The 10-year JGB yield dipped to 1.57%, a three-week low, as real wages turned positive for the first time since December. Strong base pay and summer bonuses increased expectations for a BoJ rate hike, with Ueda reiterating a hawkish stance. Eased US auto tariffs further supported sentiment.
• Germany: The 10-year Bund yield fell to 2.67%, down from monthly highs, as US data pulled global yields lower. Despite early-week spikes from French political concerns and UK fiscal risks, Eurozone inflation remained near target. Germany’s borrowing plans of €500 billion through 2029 added a fiscal layer to rate discussions.

Commodities

Gold hit an all-time high of $3,595 per ounce, rising over 1% on Friday alone, as US jobs data weakened the dollar and increased rate-cut expectations. Fed officials have signaled openness to easing, with around 66 bps of cuts now priced for 2025. A steepening yield curve, political risks, and Fed credibility concerns supported safe-haven demand.

Silver neared $41 per ounce, approaching its 2011 highs, as real yields declined and industrial demand surged. Solar and EV sectors continued to drive consumption, while constrained supply added to the upside, reinforcing the metal’s structural deficit outlook for 2025.

Currencies

US Dollar: The dollar index slid to 97.7, its lowest in weeks, following soft payrolls and rising unemployment. The data triggered a drop in short-term yields and reinforced expectations for Fed easing. Markets now see three cuts in 2025. Fed credibility also came under scrutiny amid growing political pressure.

Euro: The euro climbed above $1.17, its strongest level since July. The single currency benefited from broad dollar weakness and steady inflation, with Eurozone CPI at 2.1%. The ECB is expected to hold rates steady in next week’s meeting. German and French political developments remain in focus.

British Pound: The pound rose above $1.35, supported by dollar softness, though fiscal concerns capped gains. With the Autumn Budget approaching, investors remain wary. Despite the week’s volatility, sterling is still down 0.3% on the week.

Japanese Yen: The yen strengthened toward 148 per dollar, reversing recent losses. The move was aided by reduced US auto tariffs and improved real wage data. These factors strengthened the case for a hawkish BoJ stance, with Ueda leaving rate hikes on the table.

Macro Calendar Highlights (Times in GMT)

• 1230 – US Nonfarm Payrolls (Aug)
• 1230 – US Unemployment Rate (Aug)
• 1300 – US Job Openings (Aug)
• All week – ECB Rate Decision, OPEC+ Meeting, French Confidence Vote