Gold prices rise on reduced Fed rate hike expectations
What's the story
Gold prices witnessed a slight uptick in early Asian trading on Monday as weak US job growth figures for September have significantly reduced the chances of an interest rate hike by the Federal Reserve in October. This has prompted investors to turn toward safe-haven assets like gold, pushing its spot price up by 0.3% to $4,153.32 per ounce earlier today.
Economic impact
US job growth slows more than expected in September
The US job growth slowed more than expected in September, with the nonfarm payrolls count for the previous two months revised sharply lower.
This has almost ruled out another interest rate hike by the Fed this month.
The central bank had raised its benchmark overnight interest rate by 25 basis points to the 3.75%-4% range last month, marking its first increase in three years.
Market analysis
Fed's broader hiking cycle still intact
Despite the softer labor market data, the market is still treating the Fed's broader hiking cycle as intact even if a pause occurs in October.
Tim Waterer, Chief Market Analyst at KCM Trade, said that "the softer labor market data has helped dial back October Fed hike expectations, which is providing gold some support."
He added traders now see a 22% probability of a Fed rate hike in October, down from 64% last week.
Global influence
Geopolitical tensions in Middle East
On the geopolitical front, Yemen's Saudi-backed government said it was launching a major military campaign against Iran-backed Houthis.
Waterer said, "Middle East developments will continue to matter for gold, particularly through their impact on oil prices and the broader inflation outlook."
He added, "Volatility is likely to remain elevated while oil, yields and Fed expectations stay in flux," said Tim Waterer, chief market analyst at KCM Trade.