Gold recovered on Monday after suffering its biggest weekly decline since June, as weaker-than-expected US jobs data reduced expectations that the Federal Reserve will raise interest rates again this month.
Gold was trading at $4,168.07 per ounce on Monday, according to CFD data, up 0.67% from the previous session. The metal remained down 5.38% over the past month, but was still 5.19% higher than a year ago.
The recovery followed Friday’s US employment report, which showed that employers added just 29,000 jobs in September, well below the 90,000 economists had expected.
The August figure was also revised down to 133,000 jobs from the earlier estimate of 162,000.
The unemployment rate rose to 4.2%, while annual wage growth slowed to 3.0%, its weakest pace since May 2021.
The weaker labour market has reduced pressure on the Federal Reserve to raise interest rates again in October. Markets are now pricing in only an 18% chance of an October rate increase, down sharply from the expectations seen before the jobs report. However, traders still see an 81% probability of another increase in December.
This shift in expectations is supporting gold because the metal does not pay interest. When interest rates rise, assets such as government bonds can become more attractive because they provide higher returns. Expectations of fewer rate increases therefore reduce some of the pressure on gold.
However, gold’s recovery remains limited by high US Treasury yields and a stronger dollar.
The US dollar gained about 0.4% on Monday, making gold more expensive for buyers using other currencies. Treasury yields also remain elevated, reducing some of the appeal of holding a metal that does not generate interest income.
Gold had fallen sharply last week as a stronger dollar and high Treasury yields weighed on the metal. Friday’s jobs data initially reduced rate-hike expectations, but the broader rise in bond yields continued to limit gold’s gains.
Meanwhile, developments in the Middle East are adding another source of uncertainty for financial markets.
Yemen’s Saudi-backed government said on Sunday that it had launched a major military campaign to retake areas controlled by the Iran-backed Houthis. The development could affect oil prices and the wider inflation outlook, which could in turn influence expectations for US interest rates.
For now, gold is being pulled in different directions. The weaker US labour market is reducing expectations of an immediate Fed rate increase, while high Treasury yields, a stronger dollar and renewed Middle East tensions continue to limit the metal’s recovery.
