Last Friday, the United States reported that employers added only 29,000 jobs in September. Economists had expected about 90,000. On paper, that should have been good news for gold, yet the metal fell about 3% over the week and finished near $4,140 per ounce. By Monday it had recovered slightly to around $4,167. If that seems confusing, you are in good company, because several professional analysts called the reaction illogical. This article explains what happened in simple terms.
First, why jobs data matters to gold
The US central bank, the Federal Reserve, sets interest rates for the world's largest economy. When the economy is strong and prices rise quickly, the Fed tends to raise rates. When the economy weakens, it tends to hold or cut them. Gold does not pay interest, so higher rates make it less attractive compared with a bank deposit or a government bond. Lower rates make gold more attractive. That is why traders watch jobs numbers so closely.
The Fed raised rates last month for the first time in about three years, which surprised many people. Since then, the question has been whether it will raise rates again at its next meeting on 28 October. The weak jobs report changed that outlook sharply.
What the report showed
According to Kitco's coverage of the data, payrolls rose by just 29,000, unemployment moved up to 4.2%, and figures for July and August were revised lower. The revisions came to about 60,000 fewer jobs than first reported. Put simply, the US job market is cooling faster than expected.
The CME FedWatch tool, which estimates market-implied probabilities, now shows about a 22% chance that the Fed raises rates on 28 October. Before the report, that figure was around 70%. A big drop in the expected chance of a hike normally helps gold, because it lowers the competition from interest-bearing assets.
So why did gold not jump?
Two other forces pushed in the opposite direction. Government bond yields were rising, and the US dollar was firm. Gold is priced in dollars, so a stronger dollar makes it more expensive for buyers using other currencies, and that tends to reduce demand. Higher bond yields also compete with gold in the same way that higher interest rates do.
There was also a positioning effect. After gold's strong run earlier in the year, many traders held large buying positions. When prices began to slide, some of them sold to protect profits. That selling can overwhelm good news in the short run. Analyst Sean Lusk told Kitco that rallies are hard to sustain at the moment, which sums up the mood.
Market data from Trading Economics shows gold now sits about 26% below its record of $5,598.58 set in late January. Gold fell nearly 6% in September alone, which helps explain why traders have been cautious. A Bloomberg report on Monday said gold edged higher as markets weighed the jobs data against the Fed's path.
Is the bigger trend still intact?
Not everyone is worried. Analyst Adrian Day expects gold to be a little lower but not for long. Marc Chandler thinks gold could climb if it moves above about $4,280 to $4,300. On the cautious side, Alex Kuptsikevich warned that the price could test $4,000 again if negative factors continue. Support for the long-term view comes from physical buyers. Heraeus estimates that China will import about 1,700 tonnes of gold this year, as noted in a market report on China's gold demand, and the People's Bank of China added 20.2 tonnes to its reserves in August.
In short, professionals disagree about the next few weeks. That is normal. Gold prices rarely move in a straight line, and short-term swings of 3% to 4% in a week have happened many times in the past.
The calendar to watch
Three events could move the price before the Fed decides. The Fed's meeting minutes come out on Wednesday, and they show how seriously officials considered raising rates again. The US consumer price index, a measure of inflation, is due on 14 October. If prices are rising faster than expected, rate hike worries could return. If inflation cools, gold may find support. Then comes the Fed decision on 28 October.
What this means if you are thinking of buying gold jewellery
Most people who buy gold jewellery are not trading. They are buying a piece to wear, to give, or to keep as a small store of value. For them, the weekly price move matters less than a few practical checks. First, look at the price per gram on the day and compare it with what the shop is charging for the item. Second, ask how the workmanship charge is calculated, since that is separate from the gold content. Third, check the purity mark and the weight on your receipt. Fourth, ask about buyback or exchange terms before you pay.
A lightweight piece uses less gold, so the price swings of the market affect the final price less than they would for a heavy chain. If prices have dropped from the January peak, some buyers see the decline as a better time to purchase, while others prefer to wait for stability. Neither approach is wrong. Decide based on your budget, and avoid stretching beyond it because of fear of missing out.
The main lesson from the past week is that markets do not always react the way textbooks say they should. Good news for gold can be cancelled out by a stronger dollar and rising yields. Understanding why helps you read the headlines calmly instead of reacting to every swing.
Starlight Jewellery offers a wide range of lightweight gold rings, with Buy Now Pay Later options available. Browse the collection at starlightjewellery.com.sg.