U.S. Employment Surprise Tempers Gold's Safe-Haven Appeal as Fed Rate Cut Odds Diminish

Precious metals retreated sharply on Thursday following stronger-than-expected U.S. labor market data, which significantly cooled investor bets on another Federal Reserve interest rate reduction in December. The employment numbers released by the Bureau of Labor Statistics revealed a robust addition of 119,000 jobs in September—nearly 2.4 times the anticipated 50,000—marking the most substantial monthly gain in half a year. This resilience in hiring stands in stark contrast to August’s revised 4,000 job loss, prompting market participants to reassess their monetary policy expectations.

Price Action in Precious Metals

Front-month Comex Gold for November delivery fell $21.20, or 0.52%, to settle at $4,056.50 per troy ounce, while its silver counterpart experienced a steeper decline of 54.30 cents, representing a 1.07% drop to $50.247 per troy ounce. The pullback reflects a weakening demand for traditional safe-haven assets as investors shift their positioning amid shifting rate-cut probabilities.

Labor Market Signals Mixed With Rate-Cut Uncertainty

Despite showing employment strength, the labor data presented a more nuanced picture for policymakers. The unemployment rate ticked higher to 4.4% in September from 4.3% the prior month—a detail that may not have registered strongly with markets given the headline job beat. More critically, this represents the final unemployment snapshot before the Federal Reserve’s December 9-10 gathering, as the Labor Department announced that October’s employment report will not be published. Average hourly earnings expansion remained unchanged at 3.8% year-over-year, suggesting inflation pressures remain contained relative to headline concerns.

Weekly jobless claims data, covering the week ending November 15, showed initial claims declined by 8,000 to 220,000, while the four-week moving average settled at 224,250—signals suggesting labor market stability persists.

Fed’s Dovish Consensus Crumbles

The stronger-than-expected labor report undermines recent dovish interpretations of Federal Reserve messaging. Earlier this month, the U.S. Federal Reserve implemented its second rate reduction of 2025 on October 29, cutting rates by 25 basis points to the 3.75% to 4.00% range. However, October’s Federal Open Market Committee meeting minutes released recently illuminated sharp disagreement among policymakers regarding further easing. Two dissenting members expressed opposition—one advocating for a more aggressive 50-basis-point reduction while the other preferred maintaining the current rate level entirely. Despite these divisions, all members reaffirmed the Fed’s dual mandate of maximizing employment while anchoring inflation expectations at 2%.

Federal Reserve Chair Jerome Powell had cautioned that December’s rate-cut decision remains uncertain, noting it is “not a foregone conclusion.” Today’s employment surprise appears to validate his measured stance.

Rate-Cut Probabilities Drop Sharply

Market expectations have recalibrated significantly following the data release. According to CME Group’s FedWatch Tool, traders now assign just a 39.4% probability to a 25-basis-point rate reduction at the Fed’s December meeting—a marked compression from earlier expectations. Analysts acknowledge that while the employment report demonstrates some underlying labor market softening, its delayed nature may limit direct influence on December’s policy decision.

A lower-rate environment typically bolsters demand for non-yielding assets such as gold; the reversal of rate-cut momentum therefore explains today’s precious metals selloff and suggests further headwinds for gold investors until the Fed provides clearer policy guidance.