Gold Prices Rise
Gold Rises Above $4,200 After Weak US Jobs Data Dulls Rate Hike Hopes
Anonymous
Key Points
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Alongside the weak payroll figure, the unemployment rate rose to 4.2% and annual wage growth slowed to 3.0%, its weakest pace since May 2021.
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Fed Vice Chair Philip Jefferson and New York Fed President John Williams had already urged policymakers to take more time to assess whether further rate increases were needed to control inflation.
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In September, SPDR Gold Shares added 13.3 tonnes of gold holdings, its third consecutive monthly increase, while iShares Gold Trust added 3.0 tonnes; both funds saw holdings rise in the same month for the first time since February.
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Gold fell 8.5% in September as the dollar rallied and crude oil prices rose. MKS PAMP research head Nicky Shiels said a model based on the surge in US yields and the dollar suggested gold should be lower, while estimating its “debasement premium” at about $840 an ounce.
Gold climbed 1.1% above $4,200 per ounce after the U.S. added just 29,000 jobs in September, far below the expected 90,000. Kitco reported that the weak payroll data and a rising 4.2% unemployment rate pushed Treasury yields and the dollar lower, cutting the odds of an October Federal Reserve rate hike to below 15%. The jobs report also showed wage growth slowed to 3.0% annually—its weakest pace since May 2021—suggesting inflation pressure is finally easing.
Despite the initial rally, gold gave back some gains and remained on track for a second consecutive weekly decline. Yet strong investment demand kept prices supported. RTTNews noted that SPDR Gold Shares added 13.3 tonnes of holdings in September, while iShares Gold Trust added 3.0 tonnes—the first time both funds expanded in the same month since February.
Weak Jobs Data Reshapes Fed Rate Expectations
The September payroll report shocked markets. Employers added only 29,000 jobs versus the expected 90,000 addition. FXEmpire reported that prior months' gains were also revised sharply lower—July was cut to a net loss of 10,000 jobs, while August dropped to 133,000 additions. These revisions stripped 60,000 jobs from previous estimates over just two months.
The weak data came even as Yahoo Finance reported that Fed Vice Chair Philip Jefferson and New York Fed President John Williams had urged policymakers to "take more time to assess whether further rate increases were needed to control inflation." The jobs miss gave them ammunition. Traders now price in less than 15% odds for an October rate hike but still expect about a 70% chance of a December increase.
Precious Metals Benefit From Softer Interest Rate Outlook
Lower odds of a near-term rate hike sent gold and silver soaring in early U.S. trading. FXStreet reported that silver rose 2.13% to $61.56 per ounce on October 5, riding the same tailwind as gold. Higher Treasury yields normally make gold less attractive—it pays no interest—so falling yields push investors toward bullion.
Yet the rally masks a deeper tension. According to RTTNews, MKS PAMP metals strategist Nicky Shiels said that traditional models based on U.S. Treasury yields and dollar strength suggest gold should trade lower. He pegged gold's "debasement premium"—the extra premium buyers pay due to mistrust of fiat currency—at roughly $840 per ounce. Without that investor anxiety, gold prices would fall significantly.
Persistent Inflows Signal Deeper Investor Concerns
Despite gold's September decline of 8.5%—driven by a surging dollar and rising crude prices—investment demand remained steady. Kitco reported that SPDR Gold Shares, the world's largest gold ETF, added 13.3 tonnes in September. This marked the third consecutive monthly increase for the fund. Simultaneously, iShares Gold Trust added 3.0 tonnes, and both funds posted gains in the same month for the first time since February.
The consistent inflows suggest investors are rotating into gold as a hedge against economic uncertainty. Wage growth deceleration to 3.0% yearly does ease wage-push inflation fears. But high energy prices—stemming from the ongoing U.S.-Israeli conflict with Iran—still risk stagflation: slow growth paired with stubborn price pressures. Gold serves as insurance in such scenarios.
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