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Gold prices rebounded on Friday, October 2, after U.S. employment growth came in well below expectations, easing market bets on an imminent Federal Reserve rate increase. The recovery was limited, however: renewed selling in government bonds and a stronger dollar earlier in the week had left bullion on course for a weekly decline of more than 3%.
By 4 p.m. Eastern time, spot gold was down 0.8% at $4,145.78 an ounce, while U.S. gold futures were up 0.3% at $4,174.59, according to Investing.com. For the week, spot prices had fallen 3.3% and futures 3.4%. The mixed session reflected competing forces: weaker labor data reduced the perceived need for tighter monetary policy, while elevated longer-term yields continued to make non-yielding gold less attractive.
September payroll growth misses forecasts
The U.S. Bureau of Labor Statistics reported that nonfarm payrolls increased by 29,000 in September, against a Reuters-polled economist forecast of 90,000. The unemployment rate edged up to 4.2% from 4.1% in August. The BLS also revised July and August employment changes down by a combined 60,000; August’s reported increase was revised from 162,000 to 133,000.
The report showed average hourly earnings rose 0.1% in September and were up 3.0% over the year. The workweek for private-sector employees held at 34.4 hours. The BLS said employment changed little across major industries, while health care continued to add jobs, though at a slower pace than its average monthly gain over the prior year.
Following the data, market-implied odds of a quarter-point Fed rate increase at the October meeting fell. Investing.com cited CME FedWatch estimates of about a 23% probability of a hike and 77% probability of rates remaining unchanged. Those probabilities are market pricing, not a commitment by policymakers.
Bond-market pressure offsets rate repricing
Treasury yields initially eased after the employment report, as traders reduced expectations for near-term tightening, but bond selling resumed later in the session. Longer-dated yields have been under pressure from concerns about oil-related inflation, government borrowing and large corporate debt issuance linked to artificial-intelligence infrastructure investment, Investing.com reported.
The contrast across maturities was notable. The two-year Treasury yield was down 2.9 basis points for the week, while the 10-year yield was up 10.3 basis points and the 30-year yield had climbed 12.9 basis points. Both longer-term yields reached their highest levels since 2002 on Thursday, according to the report.
When bond yields rise, gold can become less appealing relative to interest-bearing assets because bullion does not pay interest. A rising dollar can also weigh on gold by making dollar-priced metal more expensive for buyers using other currencies. The combination had helped drag prices lower during the week, even as Friday’s soft employment data offered some support.
Fed faces competing signals
The labor figures arrived amid signs of persistent inflation and a recent run of resilient economic indicators. Investing.com reported that the latest reading of the Fed’s preferred inflation gauge was softer than expected, although its 3.4% annual rate remained above the central bank’s 2% target. That leaves policymakers weighing labor-market weakness against inflation that has not returned to target.
Chris Osmond, chief investment officer at Fifth Third Wealth Advisors, told Investing.com that the payroll figure materially changed the rate outlook because bond traders had previously anticipated further Fed increases despite an expected slowdown in hiring. He described the combination of sticky inflation and weaker employment as a difficult signal for the Fed’s dual mandate.
The Fed’s next policy decision was scheduled for October 28. Investors were also looking ahead to September consumer and producer price readings later in the month for further evidence on inflation. Neither the jobs report nor market pricing established what the central bank will decide; the coming data and policymakers’ assessment remain key unknowns.
