Gold Surges Past $4,160 on Fed Policy Recalibration

Gold prices surged past $4,160 on Monday, fueled by a reassessment of Federal Reserve policy following a weaker-than-expected U.S. jobs report. The metal's rise came despite elevated Treasury yields and a strong dollar, highlighting strong structural demand from exchange-traded funds and foreign central banks. Spot gold climbed 0.7% to $4,168.89, while December U.S. futures rose 1% to $4,196.90.

The shift in market sentiment was triggered by disappointing September employment figures, which lowered the probability of another Fed rate hike this month from nearly 70% to about 21%. Gold, which pays no yield, typically faces pressure when Treasury rates rise above 5%. However, its recent resilience suggests traders believe the Fed's tightening cycle is nearing its end.

Demand for gold remains robust, with global physically backed ETFs reaching a record 4,189 tonnes in holdings, following $18 billion in inflows in August. China's central bank also continued its buying spree, adding 20.2 tonnes in August, marking 22 consecutive months of accumulation. This demand has provided a buffer against the drag from high interest rates.

Analysts at Morgan Stanley identified $4,000 as a critical support level, citing strong physical buying and the potential for lower bond yields. However, inflation risks and the possibility of a December hike keep bearish pressure in play. The outlook for gold remains shaped by these competing forces, with structural demand providing a floor to absorb selling.