The strong jobs report proved that the US economy is still growing despite two negative quarterly GDP releases. And that means that gold price rally could be in jeopardy.
Gold lost 1% on Friday in response to the fact that the US economy added 528,000 jobs in July. The July report doubled economists' expectations for an additional 250,000 jobs. Gold rebounded on Monday, with December Comex gold futures rising to $1,793.00, up 0.70% on the day.
Friday's sell-off was triggered by a change in opinion that markets were prematurely pricing the Fed's turnaround due to an aggressive tightening cycle.
This week, it is important to pay attention to the US July inflation report, in which economists predict that the annual inflation rate will be 8.7% after rising to 9.1% in June.
Logically, inflation will continue to be high. The indicator to watch is core inflation, excluding the food and energy sectors, the core consumer price index, which will be published Wednesday.
Economist consensus suggests that annual core inflation will accelerate to 6.1% from 5.9% in June.
Last week, hawkish Fed speakers opposed the idea that the US central bank would balk at raising rates.
Chicago Fed President Charles Evans said the US Central Bank is likely to keep raising rates excessively until it sees a decline in inflation.
San Francisco Fed President Mary Daly said inflation is still a problem. And that the Fed has a long way to go to reach its price stability goal.
According to St. Louis Federal Reserve President James Bullard, there are several paths to the transition of monetary policy cuts.
And Richmond Fed President Thomas Barkin noted that the Fed is ready to pay a hefty price to control inflation called a recession.
