Gold Edges Higher as Markets Weigh Jobs Data Impact on Fed Path

Gold prices rebounded on Monday following their steepest weekly decline since June, as concerns over the U.S. labor market softened expectations of another Federal Reserve rate hike. At 20:40 ET, gold reached $4,153.66 per ounce, up 0.3% after falling 3.4% the previous week. Silver (XAG/USD) gained 1.3% to $61.15 after dropping more than 6% last week, its largest one-week decline since mid-July.

Platinum and palladium also rose. The dollar showed minimal movement after three consecutive weeks of gains. U.S. nonfarm payrolls rose by just 29,000 in September, below forecasts. This weaker hiring data lessened pressure on the Fed to raise interest rates rapidly to combat persistent inflation. Now, markets anticipate roughly a 20% chance of an October rate hike, compared to around 70% a week ago.

Since rates typically diminish gold's allure due to its lack of interest income, the labor market's softness eased the appeal of the precious metal. The weaker economy emerged after gold slumped over 6% in September, its biggest monthly decline since June, as investors fretted that energy-driven inflation would sustain higher rates for longer.

Despite this, Fed officials have resisted predictions of an immediate rate increase. Minutes from the Fed's September meeting, when policymakers raised interest rates for the first time in three years, are due soon and may shed more light on monetary policy. Inflation remains a concern, with oil prices climbing due to a growing Middle East conflict.

In Yemen, Saudi-backed forces initiated an operation to reclaim areas under the control of Iran-backed Houthis. This energy price surge could maintain inflation levels and complicate the Fed's policy direction, even as the weak payrolls report reduces near-term pressure for a rate hike. U.S. Treasury yields have also climbed, reaching their highest points in over two decades.

U.S. Treasury Secretary Scott Bessent downplayed these concerns, stating that the higher yields align with global trends. For gold, the mix of a weaker labor market and tempered October hike expectations offers some relief, but high bond yields and renewed energy inflation risks continue to constrain the metal's upside, according to ANZ.