Gold Prices Under Pressure Amid Rising Yields and Geopolitical Tensions

Gold prices faced significant pressure in the week ending October 2, trading between $4,111 and $4,276. The metal slumped nearly 4% on September 28 due to a rallying US dollar and surging yields. Despite attempts at recovery, elevated yields, high oil prices, and a firmer dollar kept gold near $4,150, though it held support around $4,100. The metal closed with a 0.86% daily loss at $4,140 on Friday, marking a weekly loss of 3.36%. As of Monday night, gold was trading nearly 0.2% lower at $4,130.

Recent economic data showed mixed signals. The US ISM Services Index edged lower to 54.90 in September, while the Eurozone’s S&P Global Manufacturing PMI matched forecasts at 53. The UK services PMI accelerated to 52.10. The much-awaited US nonfarm payroll report for September was disappointing, with only 29K jobs added, far below the forecast of 90K. The unemployment rate edged higher to 4.2%, but the labour force participation rate increased to a near four-year high of 61.8%.

Geopolitical tensions in the Middle East added to market volatility. Iran's top security official warned of potential new frontiers and surprises, while the UK Maritime Trade Operations reported strikes on three tankers in the Strait of Hormuz. Saudi Aramco's CEO warned that global crude oil stockpiles are running thin, and the Group of Seven planned to release 100 million barrels of oil to bring down prices. Brent oil futures were trading nearly 0.5% lower at $101.80 as of Monday night.

Upcoming data releases include the ADP weekly employment report, August trade balance, and the September FOMC meeting minutes. The probability of a Federal Reserve rate hike in October has dropped sharply to 26%. Bundesbank President Nagel highlighted the case for central banks to increase their gold holdings due to rising debt levels and credit risks associated with government bonds.