Gold Falls as US-Iran Tensions Boost Oil, Crush Rate-Cut Hopes

Gold climbed above $4,150 an ounce on Monday, recovering some of the previous session’s losses as weaker-than-expected US jobs data eased pressure on the Federal Reserve to raise interest rates further. Data released Friday showed the US economy added just 29,000 jobs in September, far below expectations for a 90,000 increase, following a downwardly revised gain of 133,000 in August. The unemployment rate rose to 4.2%, while annual wage growth unexpectedly slowed to 3.0%, its weakest pace since May 2021. Markets are now pricing in nearly an 80% chance that the Fed will keep policy unchanged this month, while expectations for a December hike remained around 69%. Meanwhile, elevated Treasury yields continued to weigh on precious metals, with the US 10-year yield hovering near its highest level since 2002. Traders also faced heightened Middle East risks as Saudi-backed Yemeni forces launched a full-scale military operation to retake areas controlled by the Iran-backed Houthis.

Gold traded around $4,140 an ounce on Friday 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 expectations of 90,000, following a downwardly revised gain of 133,000 in August. The unemployment rate rose to 4.2%, while annual wage growth slowed unexpectedly to 3.0%, its weakest level since May 2021. The softer labor-market data has further reduced expectations of an October rate hike. Money markets are now pricing in a near 20% chance of a rate increase this month, while the probability of a hike in December remains above 80%. Rate-hike expectations had already fallen following comments from Fed policymakers Vice Chair Philip Jefferson and New York Fed President John Williams, who indicated that policymakers should take more time to assess whether further rate increases are necessary to bring inflation under control.

Gold held below $4,200 an ounce on Friday and were headed for a second consecutive weekly decline, pressured by higher oil prices amid concerns over a potential escalation in the US-Iran conflict. The metal also faced headwinds from a stronger dollar and elevated Treasury yields as investors assessed the latest Federal Reserve commentary and awaited a key US jobs report. Oil prices rose as the US considered deploying an additional aircraft carrier and 10,000 troops to the Middle East, raising the risk of further disruptions to regional energy supplies and renewed inflation pressures. Meanwhile, investors looked ahead to the September US jobs report, which could influence expectations for the Fed’s policy path. Minneapolis Fed President Neel Kashkari said it remains unclear how high interest rates will need to rise to bring inflation under control, emphasizing that the Fed must take the necessary steps to return inflation to its target.