Gold Recovers as Rate Hike Bets Drop to 22 Percent

Gold prices found stability early this week, supported by a weaker-than-expected U.S. labor market report that reduced expectations of further interest rate hikes. The metal settled at $4,144.04 per ounce on Friday, rebounding from losses the prior week as traders scaled back bets on an October rate increase by the Federal Reserve.

The shift in sentiment followed September's nonfarm payrolls report, which showed just 29,000 new jobs created, far below the anticipated 90,000. Revisions to July and August figures cut another 60,000 jobs, while the unemployment rate rose to 4.2% from 4.1%. This data eased pressure on the Fed to raise rates further, providing relief for gold, which does not offer yield.

The probability of an October rate hike has dropped from nearly 70% to 22%, according to CME FedWatch, with markets now expecting the Fed to hold rates steady at its October 28 meeting. However, analysts caution that elevated bond yields and inflation risks tied to energy prices may limit gold's upside potential.

Despite ongoing geopolitical tensions in the Middle East, gold has not seen significant gains, as high bond yields continue to attract investors away from non-yielding assets like gold. Upcoming data releases, including the Fed's meeting minutes on Wednesday and the U.S. consumer price report on October 14, will be closely watched for further clues on monetary policy.