Gold Gains as Weak Jobs Data Lowers Fed Rate Hike Odds
Gold (XAU/USD) is currently trading between $4,157 and $4,165, benefiting from a bullish setup driven by weaker-than-expected U.S. jobs data. The September payrolls report showed only 29,000 new jobs, far below expectations, while the unemployment rate rose to 4.2%. This weak data reduced the likelihood of a Federal Reserve rate hike in October to just 18%, down from 64% before the report.
The technical outlook for gold remains cautiously bullish, with $4,191 identified as the first major resistance level and $4,123 serving as key near-term support. Despite the weak jobs report, a strong U.S. dollar and elevated Treasury yields continue to limit gold's upside potential. The dollar has remained firm due to fiscal instability in Europe, particularly in France, which has offset some of the bullish momentum for gold.
Treasury yields, though slightly eased, remain high due to persistent fiscal deficits, elevated inflation, and high government spending. This is significant because gold does not yield any returns, making it less attractive in a high-yield environment. However, the U.S. fiscal situation, with government debt over $40 trillion, provides a structural bull case for gold due to concerns about long-term fiscal sustainability.
Investor demand for gold ETFs remains strong, with global gold ETFs attracting approximately $18 billion in August, increasing total holdings to an all-time high of 4,189 tonnes. This demand suggests that large, possibly institutional, investors see value in gold during periods of macroeconomic pressure. The RSI on the 1-hour chart is moving toward the 50 middle line, indicating some buying pressure, but analysts remain neutral until there is a sustained move above $4,191.