Gold Steadies Near $4,150 as Weak Payrolls Reduce Fed Hike Expectations

Key Takeaways

• US nonfarm payrolls rose by just 29,000 in September, well below the 90,000 forecast, while August was revised down to 133,000.
• The weak labour data lowered expectations for another Fed rate hike in October, giving gold an initial boost towards $4,210.
• The rally failed to hold as Treasury yields and the dollar recovered, with the dollar index slipping towards 101.9.
• US inflation data and Fed speakers are the next major inputs for October meeting expectations.

Gold is consolidating after an early surge on Friday's employment report, with price now trading close to its 9-period moving average and buyers yet to establish a decisive breakout.

The latest move reflects a market balancing softer labour data against persistent inflation concerns. Traders are now assessing whether gold can hold its recovery or if rebounding yields will cap further upside.

Why Traders Are Watching Gold

Gold reacted quickly to Friday's weaker US employment report as traders scaled back expectations for further near-term Federal Reserve tightening. September payrolls rose by only 29,000 against expectations of 90,000, while the unemployment rate increased to 4.2%.

The report shifted market expectations. Rather than strengthening the case for another rate hike, the data increased the probability of a Fed pause in October. Market pricing on Monday placed the chance of an October hike at only 18%, although expectations for another increase later in the year remained much stronger.

Lower rate expectations can reduce Treasury yields and the opportunity cost of holding precious metals, while a softer dollar offers additional support. However, Friday's reversal showed the relationship is not one-directional.

Key factors influencing XAUUSD include:

• Federal Reserve policy: Rate expectations remain central to yields and the opportunity cost of holding gold.
• US labour data: Weak payrolls have strengthened the case for an October pause.
• US dollar and Treasury yields: Their recovery after the NFP release limited gold's gains.
• Inflation data: Persistent price pressures continue to limit how far markets can price out future tightening.

Key Trading Levels

Gold opened around $4,141.67, briefly fell towards $4,124.64, and then recovered to $4,149.76. Price moved through $4,140 before testing the $4,150–$4,155 region, though momentum has begun to flatten near the top of the move.

The $4,150 level remains the key short-term pivot. Holding above this area could keep the recovery towards $4,160–$4,165 intact. A clean break through that zone would bring $4,200 back into focus, followed by Friday's $4,210 peak.

On the downside, a move below $4,150 may open the way to $4,140 and then the $4,125–$4,130 area. A sustained break beneath that zone would weaken the recovery and expose the psychological $4,100 level.

Gold Prediction: What's Next?

The weaker NFP report has reduced the immediate risk of another Fed rate hike in October, which supports gold. However, Friday's reversal shows the metal remains vulnerable if Treasury yields rebound or the dollar strengthens.

Attention now shifts to upcoming US inflation data and Fed speakers. Softer inflation alongside weaker employment growth would strengthen the argument for an October pause, while sticky inflation and hawkish Fed commentary could keep yields elevated and make another sustained move above $4,200 more difficult.

For a deeper analysis of gold's technical levels, macro catalysts and potential scenarios, read this article.