Gold prices moved slightly higher on Friday as investors reacted to weaker-than-expected U.S. employment data.
The softer jobs report strengthened expectations that the Federal Reserve will leave interest rates unchanged at its upcoming policy meeting.
Gold Prices Edge Higher
Spot gold rose about 0.2% to $4,187.17 per ounce, while gold futures gained around 0.3% to $4,215.82 per ounce.
Despite Friday’s rebound, gold remained on track for a second consecutive weekly decline.
Bullion has fallen by more than 2% so far this week.
Neil Welsh, Head of Metals at Britannia Global Markets, said gold was stabilizing after a difficult week, supported by easing Treasury yields and expectations for a more patient Federal Reserve.
U.S. Dollar Remains Near Multi-Month Highs
The U.S. Dollar Index slipped around 0.2% on Friday.
However, the greenback remained close to a 17-month high reached during the previous session.
The dollar was still heading toward a weekly gain of roughly 1%.
A stronger dollar can put pressure on gold prices because it makes the metal more expensive for buyers using other currencies.
Treasury Yields Ease From Recent Highs
U.S. Treasury yields also remained an important factor for the gold market.
The benchmark 10-year Treasury yield briefly climbed to 5.344% on Thursday, its highest level since 2002.
However, the yield later pulled back and stood near 5.234% on Friday.
Lower Treasury yields can support gold because they reduce the relative appeal of interest-bearing assets compared with the non-yielding precious metal.
U.S. Jobs Report Misses Expectations
September nonfarm payrolls came in well below forecasts.
The U.S. economy added just 29,000 jobs during the month, compared with expectations of around 89,000.
That was also significantly lower than the 162,000 jobs initially reported for August.
Meanwhile, the unemployment rate increased to 4.2%.
Economists had expected it to remain unchanged at 4.1%.
Fed Rate Hike Expectations Fall
The weaker labor-market data caused investors to reduce expectations for another Federal Reserve rate increase.
Markets were pricing in roughly an 84% chance that the Fed would keep interest rates unchanged at its October meeting.
That was up from around 76% one day earlier and just 36% the previous week.
At the same time, the probability of another rate hike fell to around 16%.
One week earlier, markets had placed the chance of an increase near 64%.
Softer Inflation Adds to Fed Patience
Expectations for a pause have also been supported by softer-than-expected inflation data.
Several Federal Reserve officials have recently suggested that policymakers may have room to wait before tightening monetary policy again.
The latest employment figures could reinforce that cautious approach.
A weakening labor market may make policymakers more reluctant to raise borrowing costs further.
Lower Rate Expectations Could Support Gold
A slower pace of interest rate increases could provide support for gold prices.
Gold does not pay interest, so higher rates tend to increase the opportunity cost of holding the precious metal.
When rate expectations fall, gold can become relatively more attractive to investors.
Fed Balances Inflation and Employment Risks
The Federal Reserve raised interest rates by 25 basis points in September as policymakers continued efforts to control elevated inflation.
Price pressures have remained persistent amid higher energy costs and strong investment in artificial intelligence infrastructure.
However, further rate increases also carry risks.
Higher borrowing costs can slow economic growth and weaken the labor market.
The latest jobs report could therefore encourage the Fed to remain cautious as it balances inflation risks against signs of softer employment conditions.
For gold investors, the next major catalysts will likely be Federal Reserve guidance, Treasury yield movements and incoming inflation data.
