Gold prices rose on Monday as investors reassessed the outlook for US monetary policy following weaker-than-expected employment data, with expectations for a Federal Reserve rate increase this month falling sharply.
Spot gold climbed 0.3% to $4,153.56 per ounce by 0631 GMT, while US gold futures for December delivery advanced 0.5% to $4,181.70.
The move came after data showed US job growth slowed more than economists had anticipated in September. Payroll figures for the previous two months were also revised significantly lower.
The weaker labor-market figures changed expectations for the Federal Reserve’s upcoming policy decisions. Traders were pricing in an 18% probability of a rate increase in October, while the probability of a December increase stood at 81%, according to the CME FedWatch Tool.
Gold typically gains when expectations for higher interest rates weaken because lower rates reduce the opportunity cost of holding an asset that does not generate interest.
Still, the outlook was not uniformly favorable for the precious metal. The US dollar index rose 0.4%, making gold and other dollar-priced commodities more expensive for buyers using other currencies. The stronger dollar helped restrain gold’s advance.
The Federal Reserve had already increased its benchmark overnight interest rate by 25 basis points in the previous month, taking the target range to 3.75%-4.00%. The move was the central bank’s first rate increase in three years.
The latest employment data now provide investors with another key indicator as they assess whether the Fed will continue tightening monetary policy.
For gold investors, weaker labor-market conditions and still-high expectations for interest rates are creating a mixed backdrop. Softer economic data can support gold by reducing pressure for immediate monetary tightening, while a stronger dollar and expectations for another rate increase later in the year can weigh on demand.
Investors are therefore closely watching upcoming US economic data. Further signs of labor-market weakness could strengthen expectations that the Federal Reserve will postpone additional increases, potentially giving gold prices more support.
At the same time, the continued 81% probability of a December rate increase shows that traders have not ruled out additional monetary tightening. Gold therefore remains sensitive to both economic data and movements in currency markets.
For now, Monday’s trading reflected the immediate effect of weaker US employment data, with gold posting a modest gain as investors scaled back expectations for an October rate increase.
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