Gold rises as expectations of an October Fed rate hike fade
Gold prices drifted higher on Monday after soft US economic data sharply lowered expectations of a Federal Reserve rate increase in October, lifting the appeal of the non-yielding asset. Spot gold was up 0.4% at $4,158.17 per ounce by 0150 GMT, while US gold futures for December delivery rose 0.6% to $4,186.40.
US job growth slowed more than expected in September and the nonfarm payrolls count for the prior two months was revised sharply lower, data released on Friday showed. Traders now price a 22% probability of a Fed rate hike in October, down from 64% a week earlier, according to the CME FedWatch Tool, while still assigning an 87% chance to an increase in December.
Tim Waterer, chief market analyst at KCM Trade, said the softer labour market data had helped dial back October Fed hike expectations, which was providing gold some support, but the market was still treating the Fed's broader hiking cycle as intact even if a pause occurred in October.
The US central bank raised its benchmark overnight interest rate by 25 basis points last month to the 3.75%-4.00% range, its first increase in three years. On the geopolitical front, Yemen's Saudi-backed, internationally recognised government said on Sunday it was launching a major military campaign to recapture all areas controlled by the Iran-backed Houthis.
Oil prices slipped as rising crude exports from the Middle East and the release of oil by G7 nations added to supplies, despite continuing concerns about further damage to Gulf oil infrastructure amid the Iran war. Waterer said Middle East developments would continue to matter for gold, particularly through their impact on oil prices and the broader inflation outlook, and that volatility was likely to remain elevated while oil, yields and Fed expectations stayed in flux. Among other metals, spot silver gained 1.7% to $61.40 per ounce, platinum was up 0.6% at $1,708.48 and palladium firmed 0.6% to $1,175.04.
