Gold climbs above $4,150 as Fed hike odds shift

Gold prices surged past $4,150 an ounce on Monday, driven by a weaker-than-expected U.S. jobs report that reduced the likelihood of a Federal Reserve rate hike in October. Spot gold climbed 0.4% to $4,158.17, while December futures rose 0.6% to $4,186.40. Despite this, traders still priced in an 87% chance of a Fed hike by December, suggesting a delay rather than a full reversal of tightening expectations.

The U.S. added only 29,000 jobs in September, with unemployment rising to 4.2%. This shift in timing benefits gold, as the metal is highly sensitive to real rates and the dollar. A delay in rate hikes gives investors more time to anticipate potential labor-market weakness, which could eventually lead the Fed to halt tightening entirely.

However, gold still faces challenges. The 10-year Treasury yield held steady at around 5.26%, and the dollar remained firm as the euro weakened due to French fiscal concerns. Analysts at Société Générale noted that gold is caught between strong structural demand from central banks and ETFs, and macro headwinds from a strong dollar and elevated rates.

Demand for gold remains robust, with U.S.-listed gold ETFs attracting $3.8 billion in September, following $7.9 billion in August. Globally, physically backed gold ETFs saw $18 billion in inflows in August, the second-largest monthly inflow on record, pushing holdings to a record 4,189 tonnes. China’s central bank also added about 20 tonnes in August, its largest purchase since October 2023.

Goldman Sachs analysts Lina Thomas and Daan Struyven highlighted strong sovereign demand as a key factor in their $4,900 year-end forecast. They warned that a sharp rise in Fed hike expectations could trigger a correction as speculative positioning unwinds. The next major test will be the September CPI report on October 14, which could influence Treasury yields and Fed policy expectations. Geopolitical tensions also continue to support safe-haven demand for gold.