Key Highlights

  • Gold traded around USD 4,137.65 an ounce, down about 0.96 percent daily, though up roughly 6.45 percent year over year.
  • The US economy added just 29,000 jobs in September, well below the 90,000 expected, following a downwardly revised 133,000 gain in August.
  • The Unemployment rate rose to 4.2 percent, while annual wage growth slowed to 3.0 percent, its weakest level since May 2021.
  • Money markets now price in a near 20 percent chance of an October rate hike, with December hike probability above 80 percent.

Soft Labor Data Fails to Lift Prices

Gold traded around USD 4,140 an ounce on Friday, edging modestly lower even as weaker than expected US jobs data reinforced expectations that the Federal Reserve may keep interest rates unchanged at its upcoming meeting. The US economy added just 29,000 jobs in September, well below the 90,000 consensus estimate, following a downwardly revised gain of 133,000 in August, a pattern of softening labor market momentum that would typically be viewed as supportive for gold given reduced rate hike expectations.

The unemployment rate rose to 4.2 percent, while annual wage growth slowed unexpectedly to 3.0 percent, its weakest level since May 2021. This combination of rising unemployment and cooling wage growth points to a labor market losing momentum, a dynamic that has historically supported gold prices as investors anticipate a less aggressive Monetary Policy stance from the central bank.

Rate Expectations Shift Following Fed Commentary

The softer labor market data further reduced expectations of an October rate hike, with money markets now pricing in less than a 20 percent chance of an increase this month, while the probability of a hike in December remains above 80 percent. These expectations had already shifted following comments from Federal Reserve Vice Chair Philip Jefferson and New York Fed President John Williams, both of whom indicated that policymakers should take more time to assess whether further rate increases are necessary to bring Inflation under control.

Despite this backdrop, which would typically be viewed as favorable for non yielding Assets like gold, the metal still edged lower on the day, suggesting other factors, potentially including profit taking after recent gains or positioning ahead of the Fed's upcoming meeting, may have offset the supportive labor data.

A Mixed Setup Heading Into the Fed Decision

Should the Federal Reserve ultimately hold rates steady at its upcoming meeting, consistent with current market pricing, gold could find renewed support given the metal's traditional inverse relationship with real interest rates. Continued softening in labor market data, if it persists in coming reports, could further cement expectations for a more accommodative policy path heading into year end.

At the same time, gold's roughly 6.45 percent year over year gain suggests the metal has already priced in a meaningful degree of anticipated rate relief, meaning further upside may require either a more decisive dovish pivot from the Fed or a renewed deterioration in economic data beyond what has already been reported. The elevated probability still assigned to a December hike suggests markets remain uncertain about the full trajectory of policy.

What This Means Going Forward

Gold's modest decline despite a weaker than expected jobs report highlights the complexity of translating labor market softness directly into precious metals price action, particularly when much of the anticipated rate relief may already be reflected in current prices. Whether gold resumes its upward trajectory may depend on the Federal Reserve's actual policy decision at its upcoming meeting and whether subsequent economic data confirms or reverses the recent softening trend. The elevated year over year gain suggests the metal remains in a broadly supportive environment, even if near term price action proves choppy.