Gold rises as payrolls miss cuts bets on an October hike

Gold climbed as much as 1% to about $4,223 an ounce on Friday after US employers added just 29,000 jobs in September, far short of the 89,000 economists had expected, and traders pulled back their bets that the Federal Reserve would raise rates again this month.

It was the metal's first decent session in a week. Before the 16:30 GST release, spot gold had slipped 0.6% to $4,154.78 in Asian trade and was on course for a second straight weekly loss of more than 3%, Reuters reported. Ten-year and 30-year Treasury yields had touched their highest levels since 2002 the day before.

The details were weaker than the headline number. Unemployment rose to 4.2%, a tenth of a point above forecasts. Average hourly earnings rose 0.1%, or five cents, against the 0.3% economists wanted. Revisions also took 29,000 jobs out of August, now 133,000, and 10,000 out of July, now 21,000, according to the figures reported by Kitco News.

"Gold is rising because traders are now repricing policy error," Artem Bakushev, head of risk at Monaxa, told Kitco. His view is that the Fed spent September fighting inflation that had already peaked while hiring was slowing underneath it, and that the question for markets is shifting from how many more hikes are coming to how fast the Fed might have to reverse.

What the Fed will hear

Economists were less dramatic. Adam Schickling, a senior economist at Vanguard, described a low-hire, low-fire labour market that is neither speeding up nor cracking, which gives policymakers room to wait for more data. Bill Adams, chief US economist at Fifth Third Commercial Bank, called the report mediocre rather than weak and said the September consumer and producer price reports, energy prices and events in the Middle East would matter more at the 28 October meeting.

Traders moved faster than the economists. Before the release, futures implied roughly a 25% chance of an October hike and 79% for December, according to Reuters. By the US afternoon the October figure had fallen well under 15%, USAGOLD reported. Kyle Rodda, senior financial market analyst at Capital.com, said a softer report should make the Fed more cautious, which would lower near-term hike odds and flatten the yield curve.

The swing over the week was large. On Monday, after gold's 3% slide, markets priced about a 70% chance of an October hike, Gulf News reported. On Wednesday, core PCE inflation for August came in at 0.2% on the month, a tenth below forecasts. On Thursday, initial jobless claims of 197,000 were slightly better than the 201,000 expected, and by that morning Kitco put the October odds at 37%. Friday's payrolls report took most of what was left.

The Fed raised its target range by a quarter point to 3.75% to 4.00% on 16 September, its first increase since 2023. That decision, and the climb in long-dated yields that followed it, pushed gold down more than 6% in September, its worst month since June.

Why the rally ran out of road

Gold gave back part of the gain. Late in the US session spot traded around $4,192, up about 0.4% on the day, according to USAGOLD. That leaves it well below the $4,490 area where September began, and only about $80 above the intraday low of $4,110.55 set on 28 September.

The obstacle is the level of yields, which one jobs report barely dented. A 10-year Treasury paying close to 5.3% is hard competition for a metal that pays nothing, and that trade has driven gold for a month. On 28 September alone gold fell about 3%, a move roughly 2.1 times the size of its recent daily swings (sample calc). Friday's rise was ordinary by the same measure.

Yields were still climbing on Thursday, when the 10-year touched about 5.34% and the 30-year about 5.68%, according to Kitco, with the dollar index near its high for the year. Brent crude traded at $100.10 a barrel that day, which keeps energy at the centre of the inflation argument the Fed is having with itself.

Silver followed gold, ending the session at $61.24, up 0.4%, with the gold-to-silver ratio little changed at 68.4, USAGOLD data showed. Earlier in the day, platinum and palladium had both been heading for weekly losses, Reuters reported.

Where the forecasters stand

The banks have not given up on higher prices, but they disagree on timing. Morgan Stanley expects gold to break $5,000 an ounce in the second half of 2027, and Aakash Doshi of State Street Global Advisors sees $5,000 by the second quarter of 2027, Kitco reported on Thursday. Natixis is at the other end, with a call for $4,100 by the end of this year. Several banks trimmed their 2026 numbers over the summer: Goldman Sachs cut its year-end target to $4,900 from $5,400 in June, and Bank of America lowered its 2026 average to $4,360 in July, according to a tracker of published bank forecasts.

What it means outside New York

Buyers in the Gulf feel the dollar price directly. The dirham is pegged to the dollar, so 24-carat gold in Dubai, which was quoted at Dh497.25 a gram on 29 September according to Gulf News, moves with the US price almost to the fils. In India and Australia the move arrives filtered through the rupee and the Australian dollar, which our regional bureaus cover in their own notes tonight.

What comes next

The September consumer price report is the next test. A hot core reading would bring back the hike talk that Friday's numbers cooled. A soft one would strengthen the case Bakushev is making. The Fed announces its decision on 28 October, a day before the European Central Bank.