Gold fails at $4,200 despite NFP miss as US yields climb
- Gold reverses from $4,227 despite sharply weaker US payrolls.
- October Fed hold odds rise as US Unemployment reaches 4.2%.
- The 10-year yield near 5.29% keeps non-yielding Bullion under pressure.
Gold prices dropped on Friday, with the yellow metal struggling to decisively break the $4,200 milestone. The precious metal is down nearly 1% as US Treasury yields edge higher following a less-than-stellar US employment report. The XAU/USD trades at $4,138 after peaking at $4,227 earlier in the session.
XAU/USD retreats as elevated Treasury yields overwhelm softer US jobs data
US Nonfarm Payrolls in September were well below estimates of 90K, coming at just 29K, shy of August’s downwardly revised figure of 133K. This pushed the Unemployment Rate from 4.1% to 4.2%, a tenth up on the Federal Reserve’s (Fed) projections for 2026 and 2027, but it is attributed to an increase in the participation rate.
US jobs data and dovish comments from New York Fed President John Williams and Vice Chair Philip Jefferson, who said they’re not in a rush to raise rates, raised the potential for an October skip, followed by a rate hike in December.
Money markets now expect a hold at the October 28 meeting, according to Prime Terminal. The odds stand at nearly 77% for a hold. However, for the December meeting, the chances are increasing to 88%.
Bullion failed to rally even though the Greenback is losing its safe-haven appeal. The US Dollar Index (DXY), which tracks the performance of the buck against six currencies, is down 0.14% at 101.89.
US Treasury yields remain moderately high with the US 10-year T-note yielding 5.9%, up 4 basis points, making Gold less appealing due to its non-yielding nature.
Meanwhile, light news from the Middle East is keeping energy prices depressed. Reports that Europe may release diesel and Crude from its reserves pushed West Texas Intermediate (WTI), the US Crude benchmark, down 1.6% to $91.42.
Next week, the US economic docket will feature the ISM Services PMI, jobs data, the release of the Federal Open Market Committee (FOMC) Meeting Minutes from its last meeting, a speech by Fed Governor Bowman, and the University of Michigan Consumer Sentiment.
XAU/USD technical analysis: $4,200 is Gold kryptonite, tumbles below $4,150
Struggling to decisively clear the $4,200 mark despite reaching a daily high of $4,227 opens the door for further downside.
The Relative Strength Index (RSI) shows that sellers are in charge with the index remaining below its 50-neutral level.
The XAU/USD first support is the $4,100 milestone. If sellers clear the latter, a move toward the July 29 low of the day (LOD) is likely at $3,996, with the next area of interest to the downside being the July 17 low of $3,959.
On the upside, buyers must reclaim $4,200 to have a chance of challenging the 100-day Simple Moving Average (SMA) at $4,279.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
