Gold Gains as Fed Rate Hike Expectations Cool

Gold prices climbed on Tuesday as expectations of a Federal Reserve rate hike in October softened. This shift in sentiment followed weaker-than-anticipated job growth in September and revisions to previous payroll data. The easing of rate hike expectations provided some relief to gold, despite the strengthening US dollar and rising Treasury yields.

Spot gold rose 0.3% to $4,152.04 per ounce, while US gold futures for December delivery increased by 0.56% to $4,180.00 per ounce. Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold is trading near key support just above $4,100, with macroeconomic challenges like rising real yields and a strong dollar continuing to dampen investor interest.

The US dollar maintained its gains from Monday, making gold more expensive for investors using other currencies. Meanwhile, US 10-year and 30-year Treasury yields reached fresh 24-year highs. Traders now see only a 21% chance of a Fed rate hike in October, but a nearly 70% probability for December, according to CME's FedWatch Tool.

Higher interest rates increase the opportunity cost of holding non-yielding gold. With limited US economic data expected this week, market focus is likely to remain on the dollar, yields, and ongoing political and fiscal turmoil in the euro zone. Investors are also concerned about rising government debt levels and widening budget deficits in parts of Europe, particularly in France.