Even though US September Nonfarm Payrolls data came in well below expectations, gold bulls failed to stage an effective rebound. Spot gold was last quoted at $4137 per troy ounce, down more than 3% for the week, hovering near recent lows heading into the weekend. Gold had previously attempted to break above the $4200 threshold but failed to hold gains, triggering heavier selling pressure.
The US Bureau of Labor Statistics reported that only 29,000 new jobs were added in September, far below market forecasts. The unemployment rate rose to 4.2%, while average hourly earnings edged up by just 0.1%. This weak report briefly boosted market bets on a shift in Federal Reserve monetary policy, yet it did not immediately translate into sustained buying for gold, showing the market is repricing the conflict between economic slowdown and sticky inflation.
Weak Data Failed to Improve Sentiment in the Gold Market
Simon-Peter Massabni, Head of Business Development at XS.com, said gold’s current weakness shows the market is being pulled by two opposing forces: a weakening economy on one hand, and high yields plus inflation pressure on the other. “This jobs report offers fundamental support for gold from a monetary policy perspective, yet it has not delivered technical confirmation that the broader uptrend is resuming,” he noted. He added that the key question ahead is not merely whether the labor market continues to cool, but whether that cooling will be enough to push yields lower, or if inflation remains sufficiently high to keep yields elevated.
With the cooling jobs data, markets have started to price down expectations of another rate hike later this month. Nevertheless, multiple economists stressed that even if momentum in the US labor market keeps fading, the Fed remains primarily focused on peRSIstent inflation rather than marginal deterioration in employment.
Bill Adams, Chief US Economist at Fifth Third Commercial Bank, believes the September jobs report, while disappointing, is not enough to divert the Fed’s attention away from inflation. “September CPI and PPI, oil prices, and geopolitical developments before the Fed’s next October meeting are more likely to influence the next rate decision than this mild jobs report,” he stated.
High Yields Continue to Weigh on Non-Yielding Assets
Phillip Streible, Chief Market Strategist at Blue Line Futures, pointed out that despite cooling labor market momentum, the US economy remains resilient overall. The Bureau of Economic Analysis released data earlier this week showing US gross domestic product (GDP) grew by 2.2%, beating estimates, while first-quarter growth was revised up to 2.5%.
“This is not a stagflation environment,” Streible said. “We keep seeing growth spreading across the tech sector, and in this environment, I cannot be bullish on gold.”
Analysts said although weak jobs data has largely ruled out an October rate hike, markets are still pricing in the possibility of a December rate hike. This will continue to support elevated US Treasury yields and raise the holding cost of gold, a non-interest-bearing asset. Fixed income analysts at TD Securities stated that after filtering out recent noise, the labor market is “quite solid”, with job gains near or slightly above the break-even level.
David Morrison, Senior Market Analyst at Trade Nation, thinks the worst phase for gold may not be over. “A pause in monetary tightening this month does not rule out further rate hikes. Inflation will likely remain the primary consideration for the FOMC, while its other mandate of ensuring full employment may take a back seat in the short term,” he said.
Still, Morrison believes gold’s downside room is limited. “I do not think gold is far from forming another bottom, just like it did in summer. If it still cannot gather enough momentum to rebound amid a stronger US Dollar, it may retest the key support zone around $4000. If it does get there, I think it will most likely consolidate first, build momentum as MACD resets, and then stage a sharp rally later,” he commented.
$4200 Acts as the Critical Dividing Line for Next Week
Lukman Otunuga, Senior Market Analyst at FXTM, said gold is still under pressure with limited upside, while geopolitically driven inflation continues to support rate hike expectations. He views $4200 per troy ounce as the key pivot level for next week.
“A stable weekly close above $4200 may open the door for a test of the 100-period simple moving average at $4280. A break below $4200 could trigger a drop toward $4100,” he explained.
With relatively few economic data releases scheduled for next week, economists expect headline geopolitical risks to dominate gold price volatility. Key data and events that may trigger market swings include US ISM Services PMI, the minutes from the Fed’s September monetary policy meeting, US initial jobless claims for the week ending October 2, and the preliminary UniveRSIty of Michigan Consumer Sentiment Index for early October.
Economic Data to Watch Next Week
Monday: ISM Services PMI
Wednesday: FOMC September Meeting Minutes
Thursday: US Weekly Initial Jobless Claims
Friday: Preliminary UniveRSIty of Michigan Consumer Sentiment Index
Overall, while weak employment data briefly dampened expectations of further Fed tightening, amid still stubborn inflation, yields and geopolitical risks, gold is essentially waiting for new directional confirmation in the short term. If the $4200 level cannot be recaptured soon, the $4000 support level will become a major focus for the market in the next phase.