Gold Rebounds Modestly as Fed Rate-Hike Odds Collapse and Banks Trim 2026 Targets

Gold firms at $4,159.56 an ounce after a soft September U.S. jobs report cut October rate-hike odds, though bullion is down 6.1% over 30 days.

Gold prices firmed on Monday after a bruising stretch, with the metal trading at $4,159.56 an ounce, up 0.4% on the day, as investors digested a sharply cooler U.S. labor market that has upended expectations for near-term Federal Reserve tightening.

The bounce follows a difficult month. Friday's close came in at $4,144.04 an ounce, and over the past 30 days bullion has shed 6.1% of its value. The retreat has been driven largely by shifting rate expectations in the United States — with fixed-income securities still offering attractive yields, many investors have steered clear of non-yielding assets. Volatility across bond markets has further dampened retail interest, triggering notable outflows from exchange-traded funds.

Jobs Shock Reshapes the Rate Calculus

The catalyst for the shift in sentiment was September's U.S. employment report. Nonfarm payrolls added just 29,000 positions last month, well short of the 90,000 analysts had anticipated on average. Figures for July and August were revised down by a combined 60,000 jobs, while the unemployment rate ticked up to 4.2% from 4.1% a month earlier.

The soft data has eased the pressure on the Fed to tighten policy further. For gold, which pays no yield, the prospect of a pause in the hiking cycle offers meaningful relief, since rising yields and elevated policy rates typically make interest-bearing investments more appealing by comparison.

Futures markets have repriced accordingly. According to CME FedWatch, the probability of another rate increase in October has collapsed from nearly 70% to roughly 22%. The market now overwhelmingly expects the central bank to hold steady at its next meeting on October 28. The Fed had last raised its benchmark rate by 25 basis points on September 16, bringing the target range to 3.75%–4.00%.

Analysts See Oversold Conditions, but Headwinds Persist

Despite the easing rate anxiety, the scope for a vigorous recovery remains constrained for now. U.S. Treasuries continue to yield at elevated levels, and analysts at ANZ have pointed to persistent inflation risks from higher energy prices as a factor limiting the central bank's room to maneuver — and capping gold's upside potential.

Still, major research houses are adjusting their outlooks. HSBC lowered its average forecast for 2026 to $4,490 per troy ounce, down from a previous estimate of $4,560. For the following year, the bank cut its projection to $4,825 an ounce.

At Deutsche Bank, the view is that the market is increasingly oversold. Daniel Ghali, the bank's head of metals research, noted that speculative long positions have been reduced by more than half from their June peak. HSBC, for its part, suggests the price may already be trading near a cyclical low, with fundamental factors such as budget deficits and geopolitical risks likely to provide a floor.

Central Banks Seen as the Long-Term Anchor

The longer-term picture hinges heavily on official-sector demand. HSBC expects central banks to step up as buyers if prices continue to weaken. Emerging-market nations in particular are steadily diversifying their currency reserves to hedge against foreign-exchange risk and geopolitical disruption.

Deutsche Bank likewise anticipates that official purchases will stabilize the physical market. Strong hedging demand against mounting government debt serves as a counterweight to yield pressures. For investors, the metal remains a key component of portfolio diversification — even if further turbulence lies ahead in the near term.

Data on the Horizon

Traders will be watching for fresh signals from U.S. monetary policy in the coming days. The minutes from the Fed's most recent meeting are due Wednesday and should offer deeper insight into policymakers' internal rate deliberations. Then, on October 14, the next U.S. consumer price report lands — a key gauge for the autumn's policy decisions.