Gold prices edged higher on Monday after Friday's softer-than-expected U.S. jobs report sharply lowered expectations of a Federal Reserve rate hike in October, boosting demand for the non-yielding asset. Spot gold rose 0.4% to $4,158.17 per ounce, while U.S. gold futures for December delivery climbed 0.6% to $4,186.40. A dollar hovering near a 17-month high, however, capped the gains.
The repricing traces back to Friday's nonfarm payrolls report: U.S. employers added only 29,000 jobs in September, far short of the 90,000 analysts had expected on average. Payroll counts for the prior two months were revised down by a combined 60,000, and the unemployment rate ticked up to 4.2% from 4.1%. Earlier, two Fed officials said on October 1 that they favored waiting for more economic data before making fresh policy decisions.
Markets moved fast. According to the CME FedWatch Tool, traders now see only about a 22% probability of a Fed rate hike in October, down from 64% a week ago. A hike in December remains the base case, priced at roughly 87%. The Fed raised its benchmark rate by 25 basis points on September 16 to the 3.75%–4.00% range — its first increase in three years.
While fading hike expectations support gold, which pays no interest, a firm dollar trimmed the advance. The greenback started the week near a 17-month high as traders weighed receding October hike odds against soft jobs data, while fiscal worries in France left the euro vulnerable. "The softer labour market data has helped dial back October Fed hike expectations, which is providing gold some support. But the market is still treating the Fed's broader hiking cycle as intact even if a pause occurs in October," said Tim Waterer, chief market analyst at KCM Trade.
Technicals are tugging gold in both directions. Société Générale noted that a softer-than-expected U.S. personal-consumption expenditures reading at the end of September had already tempered hike bets, and described gold's current moves as a "tug of war" between structural buyers — central banks and exchange-traded-fund flows — and macro headwinds like a strong dollar and higher rates. Analysts at Saxo Bank put initial support just above $4,100 and resistance around $4,230.
Other precious metals rose in tandem: spot silver gained 1.7% to $61.40 an ounce, platinum was up 0.6% to $1,708.48 and palladium firmed 0.6% to $1,175.04. Forecasts are diverging: HSBC cut its average gold forecast for 2026 to $4,490 per ounce from $4,560 and set 2027 at $4,825, citing expected further U.S. rate increases and rising oil prices. Goldman Sachs held its end-2027 target at $5,400, arguing tighter monetary policy would only hinder gold's short-term appreciation without changing the long-term outlook, with ongoing central-bank diversification remaining a structural driver.
With limited U.S. economic data this week, market focus shifts to the dollar, Eurozone politics and the Middle East. "Middle East developments will continue to matter for gold, particularly through their impact on oil prices and the broader inflation outlook," Waterer said. Yemen's Saudi-backed government said on Sunday it was launching a major military campaign to recapture areas held by the Iran-backed Houthis, while the Iran war still threatens Gulf oil infrastructure. But rising crude exports from the Middle East and a G7 release of oil stocks pushed prices lower: Brent crude fell 0.34% to $101.90 a barrel and U.S. WTI dropped 0.68% to $90.49. Cleveland Fed President Beth Hammack cautioned that persistently elevated inflation might become entrenched in consumer expectations. The next Fed meeting is on October 28.