Gold Hits $4,150 as Fed Hike Odds Shift
Gold prices climbed above $4,150 an ounce on Monday, driven by a weaker-than-expected US jobs report that significantly lowered the odds of a Federal Reserve rate hike in October. Spot gold rose 0.4% to $4,158.17, while US December futures increased 0.6% to $4,186.40. Despite this, futures markets still priced an 87% chance of a Fed rate hike by December, indicating a shift in timing rather than a change in the broader tightening narrative.
The September payrolls report showed only 29,000 new jobs, with unemployment rising to 4.2%. This led traders to reduce the probability of an October rate hike to 22%, down from 64% a week earlier. Gold's sensitivity to real rates and the dollar means that delaying the hike provides temporary relief, even as longer-term rate risks persist.
Gold's ability to stay above $4,150 reflects strong demand from central banks and ETFs, which is less influenced by immediate Fed decisions. US-listed gold ETFs attracted $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 4,189 tonnes.
China's central bank added about 20 tonnes of gold in August, its largest monthly purchase since October 2023. Analysts at Goldman Sachs, including Lina Thomas and Daan Struyven, highlighted strong sovereign demand as a key factor in their $4,900 year-end forecast. They cautioned that a sharp rise in Fed hike expectations could trigger a significant correction as speculative positioning unwinds.
The next major economic test is the September CPI report on October 14. A softer inflation reading could strengthen the case for a Fed pause and lower Treasury yields, while a renewed inflation surprise would have the opposite effect. Geopolitical tensions, particularly in Yemen and the Middle East, continue to support safe-haven demand for gold.