• Gold prices fall as traders return from Labor Day, despite a stronger Dollar amid US economic slowdown signs.
• US ISM Manufacturing PMI remains in contraction; employment sub-component improvement offers market some relief.
• Despite a drop in 10-year Treasury yields to 3.84%, gold only briefly recovers after dipping to $2,473.

Gold prices fell during the North American session as traders returned to their desks following the Labor Day holiday. Data from the United States (US) hinted that business activity contracted, though traders bought the Greenback, a headwind for the golden metal. The XAU/USD trades at 2490, down 0.34%.

Earlier, the Institute for Supply Management (ISM) revealed the August manufacturing PMI, remained below the 50-line contraction/expansion level, an indication of an economic slowdown. Despite this, an employment sub-component of the report improved slightly.

This is a relief for Federal Reserve officials, who remained worried about the labor market weakness. Fed Chair Jerome Powell said in a speech in Jackson Hole that employment risks are tilted to the upside.

Bullion prices ignored the fall in US Treasury bond yields yet recovered some ground after hitting a low of $2,473. The US 10-year Treasury note yields 3.84%, dropping eight basis points after the ISM’s report.

According to the CME FedWatch Tool, markets are pricing in a 65% chance of the Fed cutting its rate by 25 basis points (bps) at the upcoming September meeting. This will be a headwind for the Greenback and a tailwind for the non-yielding metal, which is expected to rise moderately, as 35% of the traders had positioned for a 50 bps cut.

"If the US jobs report is significantly weaker, speculation about a U.S. recession and faster rate cuts will resurface, further supporting gold," analysts at Commerzbank noted.

The US economic docket will be busy this week with the release of JOLTS job openings, the ADP National Employment Change, and the Nonfarm Payrolls (NFP) figures.