Gold prices rose above $4,150 an ounce on Monday as investors responded to a much weaker US jobs report by sharply cutting the odds of another Federal Reserve rate increase in October.
Spot gold gained 0.4% to $4,158.17 an ounce, while US December futures rose 0.6% to $4,186.40.
The move came even as futures markets continued to price roughly an 87% chance of a Fed increase by December.
That apparent contradiction reflects a shift in timing rather than a collapse in the tightening story, as October now looks much less likely, giving bullion breathing room even while longer-term rate risk remains.
October matters more than December for the immediate trade
September payrolls rose by just 29,000 and unemployment edged up to 4.2%, according to the Bureau of Labor Statistics. Traders subsequently cut the probability of an October increase to about 22% from 64% a week earlier.
The near-term repricing matters for gold because the metal is highly sensitive to the expected path of real rates and the dollar.
Delaying another increase gives investors more time to bet that labour-market weakness will eventually force the Fed to stop tightening altogether.
The relief is incomplete. The 10-year Treasury yield remained around 5.26% on Monday, while the dollar stayed firm as the euro weakened on French fiscal concerns.
Société Générale strategists said in the Wall Street Journal that gold is caught between structural demand from central banks and ETFs and macro headwinds from a strong dollar and elevated rates.
Structural buyers are absorbing the rate shock
Gold’s ability to stay above $4,150 also reflects demand that is less sensitive to the next Fed meeting.
US-listed gold ETFs attracted about $3.8 billion in September after taking in $7.9 billion in August.
Globally, physically backed gold ETFs drew $18 billion in August, the second-largest monthly inflow on record, pushing holdings to a record 4,189 tonnes, World Gold Council data show.
Official-sector buying remains another source of support. China’s central bank added about 20 tonnes in August, its biggest monthly purchase since October 2023.
Goldman Sachs analysts Lina Thomas and Daan Struyven said in research cited by Kitco that strong sovereign demand remains central to their $4,900 year-end forecast.
They also cautioned that another sharp rise in Fed hike expectations could trigger an outsized correction as speculative positioning unwinds.
December still caps the upside
The 87% December probability therefore matters, but not in the same way as an imminent October move.
Gold can rise while investors push the next increase further out, particularly if weak employment data encourages expectations that December could eventually be repriced as well.
The next major test is September CPI on October 14. A softer inflation reading would strengthen the case that the Fed can pause for longer and could push Treasury yields lower. A renewed inflation surprise would do the opposite.
Geopolitics adds another floor. Fighting in Yemen and unresolved Middle East tensions continue to support safe-haven demand, even as greater regional crude exports and G7 stock releases have pulled oil prices lower.
The post Why gold is rising above $4,150 despite an 87% chance of a December Fed hike appeared first on Invezz