Gold Rises as Fed Rate Hike Expectations Wane

Data on Friday showed that U.S. job growth slowed more than expected in September, and non-farm payrolls for the previous two months were sharply revised down.

KCM Trade market analyst Tim Waterer said, 'Weaker labor market data helped reduce expectations for a Fed rate hike in October, which provides some support for gold. However, the market is still treating the broader Fed tightening cycle as on track even if there is a pause in October.'

According to CME Group's FedWatch tool, traders now see a 22% chance of a Fed rate hike in October, down from 64% a week ago, while still factoring in an 87% chance of a hike in December.

Last month, the U.S. central bank raised its benchmark overnight interest rate by 25 basis points to a range of 3.75% to 4%, the first rate hike in three years.

On the geopolitical front, the internationally recognized Yemeni government, backed by Saudi Arabia, said on Sunday it was launching a major military campaign to retake all areas of the country controlled by Iran-backed Houthis.

Waterer said, 'Developments in the Middle East will remain important for gold, particularly through their impact on oil prices and broader inflation expectations. Volatility is likely to remain high as long as oil prices, yields, and Fed expectations are in flux.'

Oil prices fell, as higher crude exports from the Middle East and draws from Group of Seven (G7) nations' oil inventories added to supply, despite ongoing concerns about further damage to oil infrastructure in the Gulf amid the war with Iran.

For other precious metals, spot silver rose by 1.7% to $61.40 per ounce, platinum increased by 0.6% to $1708.48, and palladium rose by 0.6% to $1175.04.