Gold Rises Amid Strong Nonfarm Payrolls and Higher Yields

Written by: Rita

In the U.S., non-farm payroll employment increased by 162,000 in August, significantly exceeding expectations, while the unemployment rate remained steady at 4.1%. This report elevated the probability of a September rate hike, despite the White House publicly calling for rate cuts. The most unusual market signal came from gold, which rose even as U.S. 10-year real yields continued to climb. On September 7, Goldman Sachs released its GOAL Monthly Asset Allocation Report, noting that the seasonal cyclical rotation that began over the summer is still ongoing but has slowed, with commodities leading across asset classes; European natural gas and refined oils posted the strongest gains, driven by tensions in the Strait of Hormuz.

Leadership within equity sectors has shifted significantly. Momentum factors have experienced a sharp pullback, with capital rotating from technology stocks into non-technology and defensive sectors. Energy led the gains, while financials and healthcare emerged as the strongest performers among non-energy sectors. Global sovereign bonds were sold off, with long-end yields approaching post-global-financial-crisis highs, driven primarily by real yields and term premiums. Goldman Sachs believes that strong nominal growth, fiscal concerns, and the crowding-out effect from AI-related debt issuance have collectively pushed bond yields higher.

In August, non-farm payroll employment increased by 162,000 jobs, significantly surpassing market expectations. Data from previous months were also revised upward, while the unemployment rate remained stable at 4.1%. This report strengthened market expectations for a September rate hike, even as the White House publicly expressed its desire for rate cuts.

This week, market focus will shift to U.S. PPI and CPI data, as well as policy decisions by central banks such as the European Central Bank. Goldman Sachs economists expect both core CPI and PCE to rise approximately 0.2% month-over-month in August, with no rate hike anticipated, and significant increased uncertainty around the policy path. The market-implied probability of a September rate hike has risen from 30% to just above 50%.

Commodities were the best-performing asset class over the past three months. European natural gas and refined oil led gains, driven by tensions in the Strait of Hormuz. Grains also posted significant gains, with agricultural commodities overall showing strong performance. Goldman Sachs noted that if the "super El Niño" phenomenon persists, it could intensify supply risks concentrated in specific agricultural markets, particularly sugar, potentially pushing up food price inflation. For European natural gas, a milder winter would help alleviate pressure on storage levels.

Gold is the most noteworthy anomaly. Traditionally, gold has exhibited an inverse correlation with U.S. Treasury real yields, yet gold prices have continued to rise despite rising real yields. Goldman Sachs believes that interventions by the U.S. Treasury in foreign exchange (yen) and long-term Treasury markets have increased demand for safe-haven assets such as gold, the Swiss franc, and Bitcoin. Goldman Sachs has upgraded its gold allocation from neutral to overweight, with a 12-month price target of $5,275 per ounce, implying approximately 19% upside potential.

The key characteristic of summer market rotation is a significant pullback in momentum factors. Previously crowded tech long positions have been heavily unwound, with capital shifting toward sectors such as energy, financials, and healthcare. The S&P 500 has remained range-bound, while leadership shifts beneath the surface have been pronounced.

Goldman Sachs’ Global Equity Strategist Peter Oppenheimer noted that earnings growth is spreading from AI infrastructure to broader industries. During the Q2 earnings season, the median S&P 500 company reported 14% earnings per share growth, with non-AI-infrastructure stocks also posting their highest earnings growth rate of this cycle. Market breadth is improving, which underpins the core rationale for cyclical allocations.

Goldman Sachs maintains an overweight recommendation on U.S. and Asia-Pacific ex-Japan equities, and an underweight recommendation on Europe. The 12-month target for the Asia-Pacific ex-Japan index is 1,120 points, implying approximately 26% total return potential. The target for the Japanese Topix index is 4,600 points, implying approximately 12% upside potential.

Global sovereign bonds faced selling pressure over the summer, with long-end yields approaching post-financial crisis highs. Goldman Sachs noted that the rise in yields was primarily driven by real yields and term premiums, rather than inflation expectations. The U.S. 10-year Treasury yield rose from 4.3% at the end of June to around 4.8%. Goldman Sachs expects the 10-year U.S. Treasury yield to decline to 4.26% within 12 months, offering approximately 6% total return.

In the credit bond market, both U.S. investment-grade and high-yield bonds are recommended for overweight allocation. Despite rising yields, credit spreads continue to narrow, indicating solid corporate fundamentals. Goldman Sachs forecasts a 12-month total return of approximately 9.5% for U.S. investment-grade bonds and around 7.6% for high-yield bonds.

Goldman Sachs maintains a procyclical allocation framework under the current macroeconomic environment. Within equities, it overweight U.S. stocks and Asia-Pacific markets excluding Japan, and underweight European stocks. In bonds, it overweight U.S. and German government bonds, underweight Japanese government bonds, and overweight U.S. investment-grade and high-yield credit bonds. Among commodities, it overweight gold, and holds neutral views on crude oil and copper. In currencies, the U.S. dollar remains supported by expectations of rate hikes, while the euro faces downward pressure.

Goldman Sachs' allocation logic is: nominal growth remains strong, supporting risk assets, while rising yields and energy prices are increasing cross-asset volatility. Gold's strength amid rising yields is a significant signal of a shift in market narrative—when safe-haven assets no longer follow traditional pricing rules, it suggests something deeper is changing.

Disclaimer

This article is a compilation and interpretation by Chaoxiang Research of a third-party brokerage research report (Goldman Sachs, September 7, 2026), combined with publicly available market information. The ratings, price targets, earnings forecasts, and related judgments cited herein reflect the views of the brokerage’s analysts and represent the position of their respective institution only; they do not reflect the views of Chaoxiang Research nor constitute any investment advice.

The market carries risks; make decisions independently. This article should not be used as a basis for buying or selling any securities.