U.S. September Payrolls Undershoot; Gold Rallies Briefly but Logs a Second Weekly Drop

U.S. September employment data came in weaker than expected, sparking an initial jump in gold that quickly faded. Spot gold ultimately fell more than 3% on the week, extending losses for a second straight week and hovering near recent lows. The U.S. Bureau of Labor Statistics said nonfarm payrolls rose by 29,000 in September, well below market forecasts. The unemployment rate edged up to 4.2%, while average wages increased just 0.1%. Gold briefly pushed above $4,200 an ounce before sellers returned. Markets have largely priced out an October rate hike, but expectations for another move in December remain in place. Elevated U.S. Treasury yields continue to weigh on gold by raising the opportunity cost of holding the non-yielding asset. SimonPeter Massabni, Head of XS Business Development, said gold's underperformance reflects a market pulled between signs of economic weakness and the pressure from high yields alongside persistent inflation. He noted that the jobs data could have offered fundamental support, but technical signals have not yet confirmed a return to a medium- to long-term uptrend. In his view, the key issue is whether labor-market softness becomes strong enough to pull yields lower, or whether stubborn inflation keeps yields elevated. Economists cautioned that even as hiring cools, the Federal Reserve remains focused on inflation. Bill Adams, Chief U.S. Economist at Fifth Third Bank, said the weaker payrolls report is unlikely to shift the Fed's attention away from inflation. He added that September CPI and PPI data, gasoline prices, and geopolitical developments are more likely to influence the Fed's decision ahead of its November meeting. Blue Line Futures Chief Market Strategist Phillip Streible argued the broader economy still looks resilient. He pointed to U.S. Bureau of Economic Analysis data showing second-quarter GDP growth of 2.2%, well above expectations, and a revision lifting first-quarter growth to 2.5%. Streible said the backdrop does not resemble stagflation and, with technology still expanding, he is not bullish on gold. Trade Nation Senior Market Analyst David Morrison said the decline in gold may not be finished. He emphasized that a pause in tightening does not remove the possibility of further hikes, with inflation still the Federal Open Market Committee's top priority and maximum employment taking a back seat. Morrison said gold could remain volatile in the near term, with downside seen as more limited. If gold fails to build momentum alongside a stronger dollar, he said it may retest support around $4,000 before entering a consolidation phase. FXTM Senior Market Analyst Lukman Otunuga said gold remains vulnerable, with upside capped as geopolitically driven inflation keeps rate-hike expectations alive. He said a weekly close below $4,200 could open a pullback toward $4,100. With few major releases scheduled, markets broadly see geopolitics as a key driver this week. Data in focus include the ISM Services PMI, the Fed's September policy meeting minutes, and the University of Michigan's preliminary consumer sentiment index. As of Oct. 5 at 9:39 Beijing time, spot gold traded at $4,154.26 per ounce.