Gold prices steady after weekly slide as weak jobs data ease Fed hike bets

Gold prices rose marginally on Monday, after posting a steep weekly decline, as a slowdown in the U.S. labor market eased expectations for another Federal Reserve rate hike, while elevated Treasury yields and rising oil prices continued to weigh on bullion. 

By 09:38 ET (13:38 GMT), spot gold had risen by 0.1% to $4,145.80 an ounce, while gold futures had gained 0.3% to $4,173.25 an ounce.

"Gold steadied after its sharpest weekly decline since June, with Friday’s significantly weaker-than-expected US payrolls print easing pressure on the Fed to tighten further and providing some support to the metal," said Neil Welsh, Head of Metals at Britannia Global Markets, in a note.

U.S. nonfarm payrolls increased by just 29,000 in September, according to data released Friday, falling short of analyst expectations The weaker hiring data reduced pressure on the Fed to move quickly to raise borrowing costs in response to persistent inflation.

Markets are now pricing in about a 20% probability of an October rate hike, down sharply from around 70% a week earlier. Higher interest rates tend to reduce gold’s appeal because the metal does not generate interest income.

The softer labor market comes after gold fell more than 6% in September, its steepest monthly decline since June, as investors worried that energy-driven inflation would keep rates higher for longer.

Fed officials have nevertheless been pushing back against expectations of an imminent rate increase. Minutes from the Fed’s September meeting, when policymakers raised interest rates for the first time in three years, are due mid-week and could provide further clues on the direction of monetary policy.

Oil rises as Middle East conflict keeps inflation risks alive

Yet inflationary pressures have not disappeared, with oil prices rising amid a widening Middle East conflict. In Yemen, Saudi-backed forces launched an operation aimed at retaking all areas controlled by the Iran-backed Houthis.

Higher energy prices could keep inflation elevated and complicate the Fed’s policy outlook even as the weak payrolls report reduces near-term pressure for a rate increase.

Treasury yields have also remained elevated, with some rates reaching their highest levels in more than two decades. U.S. Treasury Secretary Scott Bessent played down concerns about the rise in borrowing costs, saying higher yields were broadly consistent with global trends.

For gold, the combination of weaker labor data and reduced October hike expectations offers some support, but high bond yields and renewed energy inflation risks continue to limit the metal’s upside, according to ANZ.