【TMGM Financial Recap】 Gold Prices Plunged Over 3% On The Weekly Chart; Even The Unexpected Nonfarm Payroll Upset Couldn't Save Gold Bulls, $4,000 May Become A Key Level!

The most dramatic scene last Friday came from the U.S. Department of Labor. In September, nonfarm payrolls increased by only 29,000, far below economists' expectations of 90,000; the August increase was revised down from the previously announced 162,000 to 133,000; the unemployment rate rose to 4.2%, higher than economists' forecast of 4.1%. After the data was released, the market's first reaction was to buy gold, with spot gold surging over 1% at one point as investors immediately reduced their bets on Fed rate hikes. But the good times didn't last. As U.S. Treasury yields reversed their decline and rose again, the dollar recovered lost ground, and gold's gains were quickly recovered and turned downward.

Gold price movements in the coming months largely depend on how much the Fed is willing to tolerate potential weakness in the labor market while remaining firmly committed to curbing U.S. inflation. In other words, the job gap has not changed the Fed's policy framework; it only reduces the tail risk of a rate hike in October, which is not enough to sustain gold's rise.

The core forces holding gold back remain the dollar and U.S. Treasury yields. Last Thursday, 10-year and 30-year U.S. Treasury yields hit their highest levels since 2002, and last Friday yields first fell but then rose after the weak employment report. The 10-year yield rose 4.72 basis points to 5.281%, the 30-year climbed to 5.6321%, the 10-year yield rose for the fifth consecutive week, and the 30-year yield rose for the second consecutive week.

For non-yielding gold, a stronger dollar means buyers of other currencies have higher purchasing costs, while higher U.S. Treasury yields increase the opportunity cost of holding gold. On a broader scale, since the outbreak of the war between the U.S. and Israel against Iran at the end of February, gold has fallen more than 20%, as the market expects inflation triggered by the conflict to keep rates elevated for a longer period.

Previously, after the Fed's September policy meeting, rates were raised and further hikes were hinted at. Chair Wash also reiterated the independence of monetary policy, despite repeated calls from U.S. President Trump to lower borrowing costs. The latest inflation data came in below expectations, and at least two senior Fed officials opposed another rate hike in October, strengthening investors' bets on holding steady this month.

Market Insight:

Gold bulls may not be overly excited at the moment, as they know the Fed remains hawkish. On Wednesday, investors will carefully review the minutes of the Fed's September monetary policy meeting, seeking clues about the balance of hawkish and dovish positions in the committee to assess the potential future direction of gold prices.