Not so fast. Just when markets were anticipating the Federal Reserve would yank the golden punchbowl that has helped support gold prices since the beginning of the COVID-19 pandemic, it appears the party is not over just yet for the precious metal.
The U.S. economy in August created only one-third the number of jobs forecasters had anticipated—just 235,000 new positions—implying that the Delta variant of COVID-19 is causing a slowdown in hiring and economic growth. That means the central bank will likely feel a need to continue greasing the wheels of the economy by pumping tens of billions of dollars into the financial system through purchases of Treasury bonds and mortgage-backed securities. It had been widely anticipated the Fed would begin tapering its massive bond-buying program in September.
If the hiring slowdown persists, the Fed will also feel pressure to continue holding short-term interest rates near zero, rather than beginning to hike interest rates, a change that has been widely predicted for next year.
Both central bank policies—injecting billions of dollars into the financial system and maintaining near-zero interest rates—are bullish for gold. After news of the weak jobs reports on September 3, the price for an ounce of gold climbed to a five-week high of $1,830.