Gold Steadies as China Demand Counters Fed Rate Uncertainty

Gold prices saw a modest rise on Monday, reaching $4,167.15 per ounce, up 0.6% from the previous day. Despite this gain, the metal remains about 26% below its 52-week peak of $5,598.58, hit at the end of January. The recent decline was partly due to a series of heavy losses in the preceding week, with Friday's close at $4,144.04.

The market has been buoyed by a reassessment of U.S. monetary policy following the September nonfarm payrolls report, which showed only 29,000 jobs created, far below the expected 90,000. Revisions further reduced the July and August tallies by 60,000 positions, pushing the unemployment rate up to 4.2% from 4.1%. This data has lowered the odds of a Fed rate hike in October to about 22%, down from nearly 70%. The Fed had last raised rates on September 16 to a range of 3.75%, 4.00%.

Physical demand from Asia, particularly China, is providing significant support. Heraeus estimates that Chinese gold imports could reach 1,700 tonnes by the end of 2026, driven by strong domestic investment demand. The People's Bank of China added 20.2 tonnes in August, bringing official reserves to 2,387 tonnes. In contrast, India's gold imports for August were estimated at 15 to 20 tonnes, with the import bill falling to $2.3 billion.

Speculative money is pulling back, with institutional fund managers reducing their net-long futures positions by 7,071 contracts to 120,318 as of September 29. Lingering inflation risks from higher energy prices could limit the Fed's flexibility, potentially capping gold's rebound. Attention now turns to the Fed's meeting minutes due Wednesday and the U.S. consumer price index on October 14, ahead of the next rate decision on October 28.