XAU/USD traded around $4,158 at 9:00 AM on Monday, up 0.38% since the opening of the Asian trading session.
Gold began the week with a modest recovery following last week's volatile movements. The market is currently digesting US employment data for September, which came in significantly weaker than expected; Non-Farm Payrolls (NFP) rose by only 29,000 jobs, compared to expectations of around 90,000. Meanwhile, the unemployment rate rose to 4.2%.
Weak Employment Data Eases Pressure on Gold
The weak employment data has dampened expectations for a Fed rate hike in October. The probability of a 25-basis-point rate hike reportedly fell to around 22.7%, down from over 64% the previous week. This situation provides some breathing room for gold, as lower rates reduce the opportunity cost of holding non-yielding assets like gold.
However, gold's recovery faces challenges as US bond yields remain high and the dollar continues to find support.
High oil prices and concerns regarding inflation could also limit expectations for Fed policy easing. Last week, gold failed to sustain its gains following the release of the employment data as yields rebounded.
Beyond interest rate factors, sentiment regarding gold is also influenced by geopolitical developments in the Middle East and oil price movements. The market remains cautious about the risk of energy supply disruptions, which could sustain inflationary pressure and impact the direction of Fed policy.
From a technical perspective, XAU/USD is currently attempting to maintain its price above the $4,150 level after failing to decisively break through the $4,200 mark several times last week. If the price manages to hold above $4,150, the potential for a recovery towards $4,200 opens up again. A decisive break above that level could strengthen recovery momentum.
Conversely, if the $4,150 level fails to hold, selling pressure could push the price back towards the $4,100 area. For now, the market will continue to monitor the USD, US bond yields, oil prices, and geopolitical developments as key drivers for XAU/USD.
