Gold failed to sustain its slight rebound during the Asian session on Monday (October 5th), currently trading below $4150/oz, virtually unchanged for the day. Despite weak US non-farm payroll data released last Friday—only 29,000 new jobs added, the unemployment rate unexpectedly rising to 4.2%, and annual wage growth slowing to 3.0%—investors chose to digest the data, and the dollar regained strong buying support, reaching its highest level since mid-April 2025. The dollar's strength has become a key factor suppressing gold, but cooling market bets on a Fed rate hike in October have provided some bottom support for gold prices. The further move of US Treasury yields away from multi-year highs has also been beneficial for gold, which does not generate interest. Traders are currently focused on the US ISM Services PMI data and speeches by Fed officials for further directional guidance.

Weak non-farm payrolls data reduced pressure for interest rate hikes, and falling US Treasury yields supported gold prices.

The US non-farm payrolls report released last Friday showed that the US economy added only 29,000 jobs in September, far below the revised 133,000 in August and market expectations of 90,000. The unemployment rate unexpectedly rose to 4.2% from 4.1% in August, and annual wage growth slowed to 3.0%, the lowest pace since May 2021. This data, coupled with the weak inflation data released last week, significantly eased the urgency for the Federal Reserve to raise interest rates. As a result, US Treasury yields moved further away from multi-year highs, providing some support for gold.

The US dollar hit a new annual high as safe-haven demand outweighed weak data.

Despite weak US jobs data, the dollar regained strong buying interest on Monday, hitting its highest level since April 2025. This movement illustrates that the market is moving beyond the influence of single data points and focusing on broader geopolitical risks. The Middle East conflict continues, with Iranian Foreign Minister Araqchi stating that there is no military solution to the conflict with the US, but Tehran remains prepared to return to the conflict; Iranian Parliament Speaker Ghalibaf stated that the Strait of Hormuz will not be open until Iran's conditions are met. The head of Yemen's governing body announced the start of a military operation to retake the remaining territory controlled by the Houthis. Furthermore, Ukraine reported that Russia launched deadly airstrikes on the Kyiv region, Kharkiv, and Dnipropetrov on Sunday. These persistent geopolitical risk premiums are favorable for the dollar, requiring gold bulls to remain cautious.

Market pricing: The probability of an October rate hike has decreased, but the probability of a rate hike before the end of the year remains high.

The CME FedWatch Tool shows that traders are currently pricing in an approximately 85% probability of a Fed rate hike before the end of the year. Nevertheless, market expectations for an October rate hike have clearly cooled. ABN Amro, a well-known institution, believes that the latest jobs report is "consistent with our baseline scenario," and the apparent recovery in the labor market in the previous two reports is "somewhat an illusion." The institution points out that the three-month average of 51,000 new jobs is robust against a labor supply backdrop, but does not indicate an overheated or tense market. The soft tone of the jobs data, especially coupled with this week's unexpected decline in the PCE report, has eliminated the urgency of a Fed rate hike in October. However, ABN Amro maintains its assessment that "persistent inflationary pressures from the energy shock" will prompt the Fed to raise rates again in December, for reasons similar to those in September—preventing price transmission to consumers and wages.

Market Focus: ISM Services PMI and Fed Speech

Gold is currently caught in a tug-of-war between bullish and bearish forces: a stronger dollar and safe-haven demand are exerting downward pressure, while easing expectations of interest rate hikes and falling US Treasury yields are providing support. Traders are currently focused on the release of the US ISM Services PMI data and speeches by influential FOMC members, factors that should provide some impetus for gold prices. Stronger-than-expected ISM data could further boost the dollar and suppress gold prices; weaker-than-expected data could reinforce the cooling logic of interest rate hike expectations, providing room for a gold rebound. Regarding speeches from Fed officials, any dovish statements could provide additional support for gold, while hawkish statements could reignite expectations of interest rate hikes.

Summarize

Gold is currently in a tug-of-war between bulls and bears. Weak US employment data has reduced the urgency of a Fed rate hike in October, and falling US Treasury yields have provided some support for gold. However, the strength of the US dollar—reaching its highest level since mid-April 2025—and safe-haven demand stemming from the Middle East and Russia-Ukraine tensions are the main resistance levels for gold. ABN Amro believes that the soft tone of the employment data has eliminated the urgency of an October rate hike, but continued inflationary pressures from the energy shock could still prompt the Fed to raise rates once in December. The market still prices in a rate hike before the end of the year at around 85%. Gold bulls are currently holding back, awaiting the ISM Services PMI and speeches from Fed officials for new directional guidance. Amid the tug-of-war between a strong dollar and cooling rate hike expectations, gold is likely to maintain range-bound trading in the short term, with support below $4150/oz and resistance above becoming key battlegrounds between bulls and bears. (Spot gold daily chart, source: FX678) At 13:50 Beijing time, spot gold was trading at $4138.66 per ounce.