Gold Surges Past $4,150 Despite High Fed Rate Hike Odds

Gold prices climbed above $4,150 an ounce on Monday, driven by a weaker-than-expected US jobs report that reduced expectations of a Federal Reserve rate hike in October. Spot gold rose 0.4% to $4,158.17, while US December futures increased 0.6% to $4,186.40. Despite this, markets still priced an 87% chance of a Fed rate hike by December, indicating a shift in timing rather than a change in the overall tightening strategy.

The September payrolls report showed only 29,000 new jobs, with unemployment rising to 4.2%. This caused traders to slash the probability of an October rate hike from 64% to 22%. Gold’s sensitivity to real rates and the dollar means that delaying a rate hike provides breathing room for the metal, even as longer-term rate risks persist.

Support for gold also comes from strong demand. US-listed gold ETFs attracted $3.8 billion in September, following $7.9 billion in August. Globally, physically backed gold ETFs saw $18 billion in inflows in August, the second-largest monthly inflow on record, pushing holdings to a new high of 4,189 tonnes. China’s central bank added about 20 tonnes in August, its largest monthly purchase since October 2023.

Analysts from Goldman Sachs highlighted that strong sovereign demand is key to their $4,900 year-end forecast for gold. However, they cautioned that a sharp rise in Fed hike expectations could lead to an outsized correction as speculative positioning unwinds. The next major test for gold will be the September CPI report on October 14, with softer inflation potentially pushing Treasury yields lower.