Gold prices found support as traders sharply reduced expectations of a US Federal Reserve interest rate hike in October. Softer employment data has strengthened the case for the central bank to wait for more evidence before tightening policy again.
Spot gold rose 0.7% to USD 4,168.89 an ounce on October 6, while US gold futures for December delivery gained 1% to USD 4,196.90, according to Reuters. The gains came despite pressure from a stronger US dollar and elevated Treasury yields.
Markets have reassessed the Fed's near-term policy outlook after weaker-than-expected US job growth in September. Payroll figures for the previous two months were also revised lower, adding to concerns about the strength of the labour market.
Traders now see only about a 21% chance of a rate increase at the Fed's October meeting, compared with much higher expectations earlier. However, markets continue to price in a significantly greater probability of a December hike.
The weaker jobs data has helped gold because lower interest-rate expectations reduce the opportunity cost of holding the non-yielding metal. Investors often turn to bullion when expectations for interest-bearing assets weaken. Gold prices slipped on October 7 as investors waited for the minutes. Spot gold fell 0.8% to USD 4,130.37 an ounce, while US gold futures declined 0.7% to USD 4,157. The stronger dollar added to the pressure.
Gold's recovery remains constrained by other macroeconomic factors. The US dollar has stayed firm, making dollar-priced bullion more expensive for investors holding other currencies.
Treasury yields have also remained elevated. The 10-year and 30-year US Treasury yields recently reached their highest levels in about 24 years, increasing the relative appeal of interest-bearing assets over gold.
Investors are now turning their attention to the minutes of the Fed's September meeting. The release is expected to provide more clues about policymakers' views on inflation, employment and the path for interest rates.
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