Gold · Daily Analysis
Gold Falls Despite Weak Jobs Report as Treasury Yields Sit at Highest Since 2002
Executive Summary
Gold fell 0.9% to approximately $4,140 per troy ounce on Friday, reversing earlier gains and ending the week down about 3.4%. A stronger dollar and elevated U.S. Treasury yields continued to weigh on bullion, even as weaker-than-expected U.S. employment data reduced expectations for an October Federal Reserve rate hike.
Fundamental Analysis
The U.S. nonfarm payrolls report showed that employment increased by only 29,000 in September, far below the 90,000 increase expected by economists. August payroll growth was also revised lower to 133,000 from the previously reported 162,000. The weaker labour-market data initially pushed gold more than 1% higher because a deteriorating employment outlook reduces pressure on the Federal Reserve to raise interest rates.
Markets subsequently reduced the probability of an October rate hike to around 22%, compared with approximately 70% earlier in the week. Combined with softer inflation data released on Wednesday and opposition from at least two senior Fed policymakers to another October increase, the jobs report strengthened expectations that the Fed could leave rates unchanged later this month.
However, the decline in rate-hike expectations did not translate into sustained gains for gold. The U.S. dollar was headed for a weekly increase, while yields on both 10-year and 30-year Treasury bonds had reached their highest levels since 2002 on Thursday. Higher yields increase the opportunity cost of holding non-yielding gold, while a stronger dollar makes dollar-priced bullion more expensive for overseas buyers.
The broader monetary-policy outlook also remains important. Gold has fallen more than 20% since the U.S.-Israeli war with Iran began in late February, as markets have increasingly focused on the possibility that conflict-driven inflation could keep interest rates higher for longer. Although recent inflation data and weaker employment have reduced near-term rate-hike expectations, the Federal Reserve has not abandoned its focus on bringing inflation down.
Key Levels
| Prior Close (Resistance) | $4,165 |
| Session Close | $4,140 |
| Psychological Support | $4,000 |
Outlook
Friday's session highlighted the difficulty gold faces even as expectations for an October rate hike have fallen sharply. The weaker jobs data provided fundamental support, but elevated long-term Treasury yields and a relatively strong dollar remained dominant headwinds. Gold therefore remained on track for its second consecutive weekly decline.
Current price: Gold — $4,140 per troy ounce
What to Watch Next
- The balance between labour-market weakness and persistent inflation. If employment keeps deteriorating while inflation stays contained, expectations for a prolonged pause or even rate cuts could eventually provide support for gold.
- Whether long-term Treasury yields — at their highest since 2002 on both the 10- and 30-year — begin to retreat, which would remove the single largest headwind currently outweighing weaker U.S. data.
- The October Fed meeting, now priced at just a 22% chance of a hike after opposition from at least two senior policymakers, a sharp reversal from roughly 70% earlier this week.
Bottom Line
The clearest takeaway from this week: gold fell despite October rate-hike odds collapsing from about 70% to 22% and a payrolls miss of nearly 70,000 jobs, because 10- and 30-year Treasury yields at their highest since 2002 are doing more damage than weaker data can offset. That's a notable break from the usual playbook where weak data supports gold, and it suggests long-end yields — not the Fed's short-term rate path — are currently the dominant variable.
This article is provided for informational purposes only and does not constitute investment, financial, or trading advice.