Light Data Week, But Gold Remains Under Bond Yield Pressure
The 10-year US Treasury yield rebounded at the end of the session after initially reacting negatively to Friday's surprise Nonfarm Payrolls (NFP) data. The rebound in Treasury yields also helped the US Dollar recover after its earlier decline, preventing gold from extending its rally.
US Nonfarm Payrolls for September came in at just 29,000, well below the 89,000 forecast. Meanwhile, the unemployment rate increased from 4.1% to 4.2%, adding to the series of surprises in the US labor market last Friday.
However, the weak jobs data failed to generate a lasting reaction in the bond market. Pressure on Treasury yields was initially limited before yields rebounded, ultimately pushing gold lower toward the end of Friday's trading session.
Bond Yields Remain Above 5%
Gold has yet to establish a new low since July despite continued pressure from elevated 10-year Treasury yields, which remain above 5%.
Deutsche Bank's head of research told Bloomberg that gold is currently in an oversold condition, making the precious metal an attractive asset for next year. Nevertheless, Deutsche Bank warned that thin liquidity during Golden Week could leave gold vulnerable to a sharp correction in the near term.
Morgan Stanley, meanwhile, sees $4,000 per ounce as a strong support level for gold. Amy Gower of Morgan Stanley said the decline toward a seven-week low has not weakened the long-term case for holding gold and that the precious metal remains attractive from a 12-month investment perspective.
Gower acknowledged that rising Treasury yields and increasing expectations for further Fed rate hikes remain challenges for gold. However, she also noted that further intervention in the bond market or a shift in inflation expectations could push Treasury yields lower.
A rapid de-escalation in the Middle East conflict, which has been ongoing for seven months, could also drive oil prices lower and ease inflation expectations, potentially providing additional support for gold.
Gower identified three key factors that could continue supporting gold prices over the next 12 months: Chinese demand, concerns over debt levels, and the possibility of easing inflation expectations driven by lower oil prices.
From this perspective, Morgan Stanley continues to view gold as an attractive asset over the next 12 months, with $4,000 per ounce serving as a strong downside support level.
Key Events This Week
Overall, this week's economic calendar is relatively light compared with the previous week. The ISM Services PMI is the only major economic release likely to become a significant market catalyst and is scheduled for Monday.
Later in the week, the market will also receive the University of Michigan Consumer Sentiment report on Friday, while the Federal Reserve's September FOMC meeting minutes are due in the middle of the week.
The FOMC Minutes are scheduled for release late Wednesday or early Thursday. The minutes cover the September FOMC meeting, when the Fed raised interest rates by 25 basis points and projected one additional rate hike in 2026, while policymakers showed significant disagreement over the 2027 rate path.
The weaker August PCE inflation data and softer September NFP report have reduced expectations for an October rate hike. However, the FOMC minutes may not fully reflect these latest developments and could instead highlight differences among policymakers regarding the future path of interest rates.
ISM Services PMI in Focus
Before the FOMC minutes, the market will focus on the ISM Services PMI, scheduled for release at 21:00 WIB on Monday.
The index is expected to edge higher from 55.4 to 55.7. Following last week's weaker-than-expected ISM Manufacturing report, traders will closely watch whether the services sector also delivers a downside surprise.
A weaker-than-expected ISM Services reading could trigger a rebound in gold prices during the US session. Conversely, a reading that comes in significantly above expectations could put additional pressure on gold.
Gold Price Scenarios
Base Scenario
The base scenario assumes NFP comes in within the 80,000–89,000 or 90,000–95,000 range. These figures would represent a moderate result and are considered the most likely scenario.
Such a reading would still indicate a weaker labor market compared with the previous month, which could generally support gold prices. Gold may initially experience some downside volatility after the release, but the overall bias could remain upward.
Bearish Scenario
The bearish scenario assumes NFP comes in between 100,000 and 125,000 jobs.
Although this would still be below the previous month's 167,000, the result could nevertheless trigger selling pressure in gold. In this scenario, $4,100 could become the key support level, followed by the $4,040 area.
The most extreme bearish reaction would occur if NFP unexpectedly jumps above 135,000 or 150,000. Such a strong employment report could significantly reduce expectations for Fed rate cuts or reinforce expectations for tighter monetary policy.
Under this scenario, gold could extend its decline toward $4,000–$4,020, with the possibility of testing support near $3,965.
Bullish Scenario
The bullish scenario assumes NFP comes in below 75,000 jobs.
A significantly weaker employment report could trigger a strong gold rebound, with buyers potentially pushing the precious metal back above $4,200 and toward $4,230.
The strongest bullish reaction would likely occur if NFP unexpectedly falls below 50,000. In that case, gold could gain enough momentum to test resistance around $4,250 or potentially move higher toward the $4,300 area.