Gold Price Dives to $4,140 Amid Rising Yields and Oil Prices

The gold price fell to $4,140 on October 2nd after futures dropped 6.6% in September and spot was down 0.9% for the day. The decline is not entirely unexpected given the economic data released over the past week. The jobs report showed a gain of only 29,000 jobs against an expected 90,000.

The weak jobs report led to a reduction in Federal Reserve rate hike odds, with CME FedWatch placing the chance of an October increase at 22.7%, down from 64.2% the previous week. However, this decrease in rate hike odds failed to boost gold prices as they were already under pressure due to rising yields.

Rising oil prices have also been a major contributor to gold's decline. Oil has become a more attractive investment option for some investors due to its correlation with inflation expectations and the long end of the Treasury market. As a non-yielding asset, gold must compete against these higher yielding options in investor portfolios.

Nicky Shiels at MKS PAMP noted that gold's premium over real yields has been increasing since 2022 and is not fading. This premium is driven by reserve diversification and geopolitical hedging. While the jobs report was initially expected to boost gold prices, the metal ultimately failed the test.