A blockbuster set of US employment figures for August has reignited talk of additional monetary tightening, pushing gold prices into a temporary decline. Huafu Fund (Hua'an Fund) believes the key variable determining the upcoming September Federal Reserve meeting is the August inflation report, scheduled for release this Friday. The strong jobs data reduces obstacles to a rate hike but is not the central driver; if inflation continues its cooling trend, there remains room for rate-hike expectations to diminish.

Over the longer term, the case for holding gold continues to strengthen. Persistent deterioration in the US fiscal deficit, combined with ongoing central bank purchases driven by de-dollarization, reinforces gold's role as a hedge against USD credit risks.

Gold prices retreated from recent highs last week. London spot gold settled at $4,431 per ounce, slipping 0.5% week-on-week, while domestic AU9999 gold closed at 966 yuan per gram, down 2.5% over the same period. The pressure came primarily from the US August non-farm payrolls report released on Friday.

Data showed the US economy added 162,000 jobs in August, nearly triple the market consensus of 56,000. July's figures were revised upward from a decline of 23,000 to a gain of 21,000, with combined revisions for June and July adding 55,000 jobs. The unemployment rate held steady at 4.1%. Broad-based strength across leisure and hospitality, construction, and manufacturing underpinned the employment surge.

Following the data release, markets quickly repriced the Federal Reserve's policy trajectory. Fed funds futures signaled the probability of a September rate hike jumping from roughly 50% to a peak of 65%, before settling near 60%. The likelihood of at least one rate increase this year now stands at 86%. Yields on two-year US Treasuries climbed to 4.41%, the highest level since January 2025, while 10-year and 30-year yields also moved higher.

Despite the robust jobs numbers, Huafu Fund advises against excessive market concern. The decisive factor for a September move remains August inflation data due this Friday. The strong employment figures merely lower the hurdle for a hike; the Fed's core objective still centers on inflation control. If inflation continues to ease, the Fed may retain ample justification to hold rates steady.

Huafu Fund also notes that US employment data suffers from poor quality and frequent revisions, which somewhat cushions the impact of the strong payrolls number on markets. Fed Governor Christopher Waller's notably dovish remarks last Wednesday further underscore the Fed's current focus on inflation. He indicated recent data shows "signs of abating inflation," and if August figures confirm sustained easing, he would lean toward supporting unchanged rates at the September meeting. However, he cautioned that if inflation comes in "unexpectedly hot, I would consider supporting a hike."

Looking ahead, Huafu Fund views the August inflation print as potentially decisive, being the final such report before the September meeting. The firm expects inflation to likely continue its downward trajectory, leaving room for rate-hike expectations to retreat. Even if a hike materializes in September, weak economic recovery and fiscal pressures make sustained tightening unlikely, and current gold prices may already reflect considerable pessimistic rate-hike expectations.

Beyond short-term volatility, gold's long-term allocation logic remains intact. Huafu Fund points to the worsening US fiscal deficit, the intractable debt problem, and the de-dollarization trend supporting ongoing central bank gold purchases, all of which reinforce gold's role as a dollar-credit hedge.

Fund flows confirm this picture. Global gold ETFs continue to see net inflows. For instance, Huafu Gold ETF (518880) reported holdings of 117.3 tonnes as of September 4, 2026, up 0.9 tonnes over the past week, 6.2 tonnes over the past month, and 16.4 tonnes since the start of the year. In contrast, overseas SPDR Gold ETF (GLD) saw its holdings decline by 18.5 tonnes year-to-date. This divergence in flows between East and West underscores the shifting demand landscape for gold in a de-dollarizing world.

Huafu Fund suggests investors monitor three key signals this week: August US inflation data, the People's Bank of China's August gold purchase figures, and developments surrounding US-Iran tensions.

For investors seeking gold exposure through public funds, Huafu Fund offers a comprehensive product suite. The Huafu Gold ETF (518880) tracks domestic spot gold prices and serves as an efficient tool for exchange-traded investors. The Huafu Gold ETF Feeder Funds — Class A (000216), Class C (000217), and Class I (022653) — provide convenient subscription and redemption channels for off-exchange investors, particularly those with dollar-cost averaging or long-term allocation strategies. Class A suits long-term holders, Class C is designed for medium-short-term trading, and Class I targets short-term traders. The Huafu Gold Stock ETF (159321) focuses on upstream listed companies in the gold industry chain, potentially capturing equity beta when gold prices rise, suitable for investors seeking higher elasticity within the gold asset class.

Fee schedule details: For ETF products, sales institutions may charge up to 0.5% for cash subscription or redemption, covering fees levied by exchanges and clearing houses. For Gold ETF Feeder A (000216): subscription fee 0.60% for amounts under 1 million yuan; 0.40% for 1-3 million yuan; 0.15% for 3-5 million yuan; 1,000 yuan per transaction for amounts of 5 million yuan or above. Redemption fee: 1.50% for holding periods under 7 days; 0.10% for 7 days to 1 year; zero for 1 year or longer. Management fee: 0.50%; custodian fee: 0.10%. For Gold ETF Feeder C (000217): subscription fee 0.00%. Redemption: 1.50% for under 7 days; 0.10% for 7-30 days; zero for 30 days or longer. Management fee: 0.50%; custodian fee: 0.10%; sales service fee: 0.35%. For Gold ETF Feeder I (022653): subscription fee 0.00%. Redemption: 1.50% for under 7 days; zero for 7 days or longer. Management fee: 0.50%; custodian fee: 0.10%; sales service fee: 0.10%.

Risk disclosure: Investors should be aware of specific risks associated with gold-themed funds, including gold market volatility, potential deviation between fund returns and domestic spot gold price returns, and risks inherent in investing in the Shanghai Gold Exchange spot market. The Gold Stock ETF is an equity fund investing primarily in constituent stocks and backup constituents of the underlying index, carrying risk-return characteristics similar to the index. This ETF may also invest in stocks eligible for the Stock Connect program, exposing investors to currency risk and specific risks arising from differences in investment environment, underlying assets, market systems, and trading rules under the Stock Connect mechanism. Fund management companies do not guarantee profitability or minimum returns. Past performance does not indicate future results. China's fund industry has a relatively short operating history and may not reflect all stages of equity market development. Market risk exists, and investment requires caution with self-assumed risk. Before investing, investors should carefully read the Fund Contract, Prospectus, and other fund legal documents, fully understand the risk-return profile of fund products, and make independent investment decisions based on their own risk tolerance, investment horizon, and objectives, selecting appropriate fund products after considering product details and consulting sales institutions for suitability opinions.