Last Friday evening, non-farm payroll data significantly missed expectations, allowing gold prices to surge quickly. London gold firmly reclaimed the 4,300 integer mark and is now in a sideways consolidation phase following the rally. The gold price has stabilized above all major moving averages, and short-term technical upside pressure is gradually easing.

One of the most critical variables currently influencing gold prices is the market's changing expectations for interest rate hikes. We all know that the Federal Reserve is the architect of interest rate policy, and their primary focus rests on two factors: employment and inflation. With no August meeting on the calendar and the September rate decision not due until the end of the month, a rate hike is unlikely in the near term. This has provided gold with a window for respite and consolidation, creating a relatively relaxed environment for the precious metal. Adding to this, after a prolonged period of decline and extended low-level consolidation, gold prices had a natural technical need for recovery. The coinciding positive non-farm data provided short-term bulls with a clear motive to act.

However, it is important to recognize that the current rebound does not appear to be backed by a brand-new bullish narrative. Looking back at non-farm data for this year, new job additions likely peaked around March or April and have since declined month over month. Previous reports have also been revised downward several times, making the weakening of US employment a part of market consensus. This latest data miss further confirms an existing judgment rather than serving as a new driving force.

Delving into the sub-data, although wage growth declined month over month, it has not yet returned to the pre-pandemic neutral range. The year-over-year hourly wage growth of 3.2% remains above the normal pre-pandemic level of around 2.9% to 3.0%. Meanwhile, wages in the healthcare, utilities, and information sectors remain strong, and companies have not initiated large-scale layoffs or reduced working hours. These details, consistent with the ADP report released earlier in the week, point to a similar conclusion: persistent inflation is still a lingering risk.

Therefore, with employment gradually weakening on one hand and the inflation stickiness problem not fully resolved on the other, the two key indicators appear unable to form a synchronized cooling effect that would create a resonant market move. It seems premature to expect gold to launch a new large-scale upward trend at this stage. As a result, when tracking gold going forward, the focus should remain on whether inflation can achieve a sustained turnaround. When monitoring the market, we must not only look at intuitive inflation data like CPI and PCE but also pay attention to its sub-components, including overall hourly wages, service sector wages, rental costs, and service consumption prices, in order to comprehensively assess the direction of inflation.

In summary, the current rebound in gold is a recovery process driven by a policy vacuum combined with growing expectations of a cooling job market. However, for gold to break out into a more impressive rally, cooperation from the inflation front will be necessary in the future.