Gold recovers slightly after weak jobs data eases Fed hike bets

Gold prices showed slight gains on Monday, recovering from a sharp weekly drop, as weaker-than-expected U.S. jobs data reduced expectations for another Federal Reserve rate hike. The metal received some support after Friday’s disappointing nonfarm payrolls report, which showed only 29,000 new jobs in September, well below forecasts. This eased pressure on the Fed to raise interest rates further, which had been weighing on gold’s appeal.

Neil Welsh, Head of Metals at Britannia Global Markets, noted that gold steadied after its steepest weekly decline since June. The weaker labor market data lowered the probability of an October rate hike to about 20%, down from 70% just a week earlier. Higher interest rates typically diminish gold’s attractiveness since it does not generate interest income.

Despite the softer labor market, inflationary pressures persist. Oil prices rose amid escalating Middle East conflict, particularly in Yemen, where Saudi-backed forces launched an operation against Iran-backed Houthis. Rising energy costs could keep inflation elevated, complicating the Fed’s policy decisions. Meanwhile, Treasury yields remain high, with some reaching their highest levels in over two decades.

For gold, the combination of weaker labor data and reduced rate hike expectations provides some support. However, high bond yields and renewed inflation risks from energy markets continue to limit the metal’s upside, according to ANZ.