Gold tried to recover on tepid US nonfarm payroll data released Friday, too, but the rally once again proved to be abortive.
Gold price prediction today: Gold prices are expected to be under pressure unless yields fall, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan. Here’s what he has to say:
Gold Performance:
- In the week ending October 2, spot gold traded in the range of $4111 (September 28) and $4276 (September 28). The yellow metal slumped ~4% on September 28 on rallying US Dollar and surging yields. The metal tried to stage recovery multiple times during the week; however, the rallies were short-lived as elevated yields, high oil prices and firmer Dollar pushed the metal back in the vicinity of $4150. However, the shiny metal continued to hold the support around $4100 throughout the week on easing the probability of a Fed rate hike in October.
- Gold tried to recover on tepid US nonfarm payroll data released Friday, too, but the rally once again proved to be abortive as oil prices recovered on reescalation of geopolitical tensions in the Middle East.
- The yellow metal closed with a daily loss of 0.86% at $4140 on Friday. It posted a weekly loss of 3.36%.
- At the time of writing this article on Monday night, the yellow metal was trading nearly 0.2% lower at $4130.
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- US ISM Services Index edged lower from six-month high of 55.40 in August to 54.90 (forecast 55) in September as ISM Prices paid rose from 72.60 in August to 74 in September (forecast 73.30). The Employment Index at 50.10 (forecast 48.80) crept back into the expansion zone after two months. The New orders Index remained healthy at 59.80.
- The Eurozone’s S&P global manufacturing PMI came in at 53 in its September final reading — in line with the forecast, so did the composite PMI at 53.10.
- UK services PMI accelerated from 51.70 to 52.10 (forecast 51.70) in its final September reading. Consequently, composite PMI at 52 topped the forecast of 51.70.
- The Eurozone’s August PPI at 1.9% m-o-m matched the estimate, while PPI rose to 8.2% y-o-y, hottest since March 2023, Vs the estimate of 7.6%.
- The much-awaited US nonfarm payroll report for September, released on Friday, was disappointing as US employers added merely 29K jobs in September, Vs the forecast of 90K. The August figure was revised lower from 162K to 133K, while two-month payroll revision was noted to be -60K. Three-month average payroll was steady as August data was revised lower from 71K to 51K. Average hourly earnings rose merely 0.1% m-o-m, Vs the estimate and prior data of 0.3%. Average hourly earnings were up 3% y-o-y as against the estimate and prior data of 3.1%. Unemployment rate edged higher from 4.1% to 4.2%, highest since June, and was above the estimate of 4.1 hours. Labour force participation rate increased from 61.6% to 61.8%, nearly four-year high. On the positive side, manufacturing payrolls increased 9K, fourth straight monthly gain, while average weekly hours all employee data held steady at 34.4 hours and was slightly higher than the estimate of 34.3 hours.
- The US nonfarm payroll report, although soft, is not disastrous as shrinking workforce means that 50k-100k jobs would keep the unemployment rate stable. Moreover, as job numbers have been going back and forth, lending much credence to one month data will not be much helpful in gauging the job market strength. The number of jobs added/month stands at 68K this year. This is one of the reasons why US yields did not fall much/gold was unable to capitalize on the soft US NFP report.
Geopolitics and oil:
- Iran’s top security official Rezaee said in a post on X on Monday that the enemy’s next mistake will bring new frontiers and surprise.
- UK Maritime Trade Operations (UKMTO) reported incidents of strikes on three tankers in the Strait of Hormuz on October 3 and October 4. Since September 28, seven incidents of strikes on vessels have been reported. Although oil volume being Shipped through the Strait has risen to pre-war level, there is a growing risk that volume will start declining as frequency of Iran’s attacks has increased.
- Amir Nasser, the CEO of Saudi oil giant Aramco, has warned that global crude oil stockpiles are running thin and it may take two years to replenish the stockpiles when the Strait is opened.
- Focusing on market share, Saudi Aramco lowered the price of Arab Light to buyers in Asia to $5 a barrel below a regional benchmark for November, which is a six-year low and compares with a discount of $2 a barrel for the current month.
- Yemen’s internationally recognized government has launched a full-scale offensive to regain Houthi-controlled regions in the country.
- The Group of Seven and its partners plan to release 100 mb of oil and diesel to bring down prices. The planned stock will be released over four months in co-ordination with IEA. Meanwhile, US diesel prices fell as President Trump may not ban exports of diesel.
- Crude oil, as has been the last week’s feature, see-sawed on Monday as traders weighed geopolitical risks with increase in oil flows and supplies.
- At the time of writing this article on Monday night, Brent oil futures were trading nearly 0.5% lower at $101.80. Oil futures were down nearly 2% last week.
Upcoming data:
- This week is relatively lighter on the data front. Major US data on the card this week include ADP weekly employment (October 6), August trade balance (October 6), September NY Fed one-year inflation expectations (October 7), September FOMC meeting minutes (October 7) and October preliminary University of Michigan consumer sentiment and inflation expectations (October 9).
Upcoming event:
- A host of Fed officials will go on air this week. The list of Fed speakers includes John Williams, Bowman and Schmid (October 6), Logan (October 7), Waller, Kashkari and Musalem (October 8), Collins (October 10) and Hammack (October 12).
CFTC positioning:
- In the week ending September 29, money managers decreased their bullish gold bets by 6,916 net-long positions to 124,418, lowest in more than two months, as per weekly CFTC data on futures and options.
- The net-long position was the least bullish in more than two months. The long-only total was the lowest in almost three months.
- Short-only positions rose 2,267 lots to 10,240 lots, four-week high.
Dollar Index and yields:
- The US Dollar Index, at the beginning of the week on October 5, surged to 102.53, highest since April 10, 2025, as the Euro slumped over the Eurozone’s political and fiscal concerns. At the time of writing this article, the Index was hovering around 102.21, up 0.25% for the day. Two-year US yields were up 2 bps 4.84%, while ten-year yields had surged more than 1% to the cycle high of around 5.34%.
Fedspeak:
- The Fed leadership is sending a signal of a brief pause in the Fed’s rate hike spree even as most of the Fed officials are hawkish.
- NY Fed President John Williams said last week that another rate hike could wait so that the Fed can have more clarity on the economy. He said price pressures may ease next year to get inflation back to target in 2028. Fed vice chair Philip Jefferson said coming rate hikes may take more time.
Fed rate hike probability:
- The probability of the Federal Reserve hiking rate in October has come down sharply from 72% seen nearly a week back to 26% currently. Investors see the Fed rate hiking rates three more times by June next year.
Bundesbank President sees a case for gold:
- Bundesbank President Nagel said on October 5 that rising debt level has strengthened the case for central banks to increase their gold holdings, while recent rise in government bond yields has made bonds relatively attractive, though the rising debt levels have increased concerns about the credit risks of these assets.
ETF flows and COMEX inventory:
- Total known global gold ETF holdings at 100.96 Moz, which is a fresh cycle high, are up nearly 2 Moz (62.4 tons) YTD as the ETF level has surpassed the level seen before the start of the Iran war on February 28.
- Registered COMEX gold inventory at 15.08 Moz is ~38% below the record peak of 24.25 Moz seen in April last year.
Gold Price Outlook :
- Easing October Fed rate hike probability, soft US nonfarm payroll report (September) and robust ETF inflows support the shiny metal; however, elevated yields and firm oil prices amid healthy risk appetite cap the gains. The Fed leaders signalling a brief pause in rate hike also supports the metal.
- Risk-on sentiments even as yields surge while oil prices remain volatile but high pose a risk to the metal.
- A breach of support zone of 4100-4110 can take the metal to $4050 level. Resistance is seen at 4230/4275/ $4335. Next major support kicks in at $4000.
- Overall, the metal is likely to remain under pressure unless yields and oil fall sharply, though dip buying amid supporting factors as listed below may cushion the downside.
- It may rise quickly should the concerns over the regional Eurozone bonds escalate to sour the risk appetite, though upside is expected to be limited as the US Dollar will also strengthen in that case.
(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)