Gold prices climbed above $4,150 an ounce on Monday, buoyed by a much weaker-than-expected US jobs report that prompted investors to sharply reduce the odds of an October Federal Reserve rate increase. Spot gold gained 0.4% to $4,158.17, while US December futures rose 0.6% to $4,186.40.
The advance came despite futures markets still pricing roughly an 87% chance of a Fed hike by December. That apparent contradiction reflects a shift in timing rather than a collapse in the tightening narrative, as October now looks far less likely, giving bullion breathing room even as longer-term rate risk persists.
October matters more than December for the immediate trade
September payrolls rose by just 29,000, and the unemployment rate edged up to 4.2%, according to the Bureau of Labor Statistics. Traders subsequently cut the probability of an October increase to about 22% from 64% a week earlier. The near-term repricing is significant for gold because the metal is highly sensitive to the expected path of real rates and the dollar. Delaying another increase gives investors more time to bet that labour-market weakness will eventually force the Fed to stop tightening altogether.
The relief is incomplete. The 10-year Treasury yield remained around 5.26% on Monday, while the dollar stayed firm as the euro weakened on French fiscal concerns. Societe Generale strategists noted in the Wall Street Journal that gold is caught between structural demand from central banks and ETFs and macro headwinds from a strong dollar and elevated rates.
Structural buyers are absorbing the rate shock
Gold's ability to stay above $4,150 also reflects demand that is less sensitive to the next Fed meeting. US-listed gold ETFs attracted about $3.8 billion in September after taking in $7.9 billion in August. Globally, physically backed gold ETFs drew $18 billion in August, the second-largest monthly inflow on record, pushing holdings to a record 4,189 tonnes, according to World Gold Council data.
Official-sector buying remains another source of support. China's central bank added about 20 tonnes in August, its biggest monthly purchase since October 2023. Goldman Sachs analysts Lina Thomas and Daan Struyven said in research cited by Kitco that strong sovereign demand remains central to their $4,900 year-end forecast. They also cautioned that another sharp rise in Fed hike expectations could trigger an outsized correction as speculative positioning unwinds.
December still caps the upside
The 87% December probability therefore matters, but not in the same way as an imminent October move. Gold can rise while investors push the next increase further out, particularly if weak employment data encourages expectations that December could eventually be repriced as well.
The next major test is September CPI on October 14. A softer inflation reading would strengthen the case that the Fed can pause for longer and could push Treasury yields lower. A renewed inflation surprise would do the opposite.
Geopolitics adds another floor. Fighting in Yemen and unresolved Middle East tensions continue to support safe-haven demand, even as greater regional crude exports and G7 stock releases have pulled oil prices lower.
This article is for informational purposes only and does not constitute financial advice.
