Gold Slightly Up as Fed Rate-Hike Bets Fade

Gold edged above $4,160 an ounce on Tuesday as fading expectations of a Federal Reserve rate hike this month offset pressure from a firm US dollar and elevated Treasury yields. Markets have scaled back bets on an October rate hike following weaker-than-expected job growth in September and downward revisions to payrolls for the previous two months. Traders now see only about a 20% chance of a rate increase this month, while still pricing in nearly a 70% probability of a hike in December, according to the CME FedWatch Tool. Higher interest rates raise the opportunity cost of holding non-yielding gold. The dollar, however, remained close to an 18-month high, supported by rising government debt, widening budget deficits and political uncertainty in parts of the Eurozone, which have weighed on the euro. Meanwhile, oil prices fell on Tuesday as resilient Middle Eastern crude exports and a G7 emergency stockpile release eased concerns over supply disruptions.

Gold fell toward $4,100 an ounce on Tuesday, hitting two-month lows as a stronger dollar and surging Treasury yields outweighed support from softer US jobs data and reduced expectations for an October rate hike by the Federal Reserve. The dollar strengthened largely as the euro weakened amid rising political uncertainty and fiscal concerns across Europe. Treasury yields also climbed to fresh 24-year highs as the global bond selloff continued, driven by mounting fiscal risks and persistent inflation concerns. ISM data showed that cost pressures in the US services sector increased at the fastest pace in more than four years last month. Meanwhile, markets are pricing in roughly a 78% probability that the Fed will keep interest rates unchanged this month following weaker-than-expected US jobs data. Elsewhere, oil prices declined on signs of increased supply from the Middle East, easing concerns over inflation and higher interest rates.

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.