Gold edged higher on Monday after posting its steepest weekly drop since June, as a weak September jobs report sharply cut the odds of an October Federal Reserve rate hike. Elevated Treasury yields and rising oil prices tied to the Middle East conflict kept a lid on the metal's gains.
XAU/USD rose 0.21% to $4,149.19 an ounce, while gold futures gained 0.4% to $4,176.97. Silver climbed 1.6% to $61.36, and platinum rose 1.1% to $1,719.71. The U.S. Dollar Index rose 0.4% to 102.31.
Weak payrolls ease pressure for an October hike
U.S. nonfarm payrolls increased by just 29,000 in September, data released Friday showed, falling short of analyst expectations. The weaker hiring numbers reduced pressure on the Fed to move quickly on borrowing costs despite persistent inflation.
As a result, markets are now pricing in about a 20% probability of an October rate hike, down sharply from around 70% a week earlier. Higher interest rates tend to reduce gold's appeal because the metal does not generate interest income. The softer labor data follows a month in which gold fell more than 6% in September, its steepest monthly decline since June, as investors worried that energy-driven inflation would keep rates higher for longer.
Fed officials have nevertheless pushed back against expectations of an imminent rate increase. Minutes from the Fed's September meeting, when policymakers raised interest rates for the first time in three years, are due mid-week and could offer further clues on the direction of monetary policy.
Oil and yields keep inflation risks alive
Inflation pressures have not disappeared, however, as oil prices rise amid a widening Middle East conflict. In Yemen, Saudi-backed forces launched an operation aimed at retaking all areas controlled by the Iran-backed Houthis. Higher energy prices could keep inflation elevated and complicate the Fed's policy outlook even as the weak payrolls report reduces near-term pressure for a hike.
Treasury yields have also stayed elevated, with some rates reaching their highest levels in more than two decades. U.S. Treasury Secretary Scott Bessent played down concerns about the rise in borrowing costs, saying higher yields were broadly consistent with global trends. For gold, the combination of weaker labor data and reduced October hike expectations offers some support, but high bond yields and renewed energy inflation risks continue to limit the metal's upside, according to ANZ.
Source: Investing.com
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