Why Gold Just Took a Hit—And What the Fed Data Means

Gold caught a beating Thursday as traders started pricing out another interest rate cut from the Fed in December. Front-month gold futures dropped 0.52% to $4,056.50/oz, while silver got hit harder, sliding 1.07% to $50.25/oz.

The culprit? Solid labor data. The U.S. added 119,000 jobs in September—way better than the expected 50,000 and the biggest jump in five months. That’s the kind of number that makes rate-cut bets look less likely.

Here’s the headwind:

The Fed’s messaging is already cautious. Chair Powell straight-up said another December cut is “not a foregone conclusion.” The October FOMC minutes just dropped and revealed sharp divisions among members—two actually voted against the October cut, with one preferring to hold rates steady entirely.

Market odds are tightening. CME FedWatch is now showing only a 39.4% probability of a 25-basis-point cut on December 9-10. Compare that to a few weeks ago, and you’ll see how fast expectations have shifted.

Why gold cares: Lower rates = higher gold demand (it doesn’t pay yield, so it thrives when cash becomes unattractive). Higher rate expectations = less demand.

The unemployment rate ticked up to 4.4% from 4.3%, so there’s some labor market softness mixed in. But that September payroll number was strong enough to tamp down rate-cut enthusiasm across the board.

Bottom line: The December cut was never guaranteed, and now the market is pricing it as a 60-40 long shot. Gold’s reaction makes sense.