Gold Market Turnaround: Weak US Employment Data Drives Gold Prices Toward the $4150 Level

Labor Market Signals Drive Safe-Haven Buying

The employment report released recently by Automatic Data Processing (ADP) has become a market focus. Data shows that over the four weeks ending October 25, the U.S. private sector reduced more than 11,250 jobs per week on average, a clear contrast to the previous week’s hiring growth, reflecting a slowdown in labor market momentum. This weaker-than-expected employment performance quickly transmitted to the gold market, with gold prices rising during Wednesday’s Asian morning session to break through $4,140, hitting a nearly two-week high.

Federal Reserve Easing Expectations Boost Gold

Market reactions to the weakening U.S. employment market directly point to Federal interest rate policies. According to the latest data from CME FedWatch, traders now expect nearly a 68% probability that the Federal Reserve will cut interest rates by 25 basis points in December, with this expectation rising to about 80% by January. A lower interest rate environment will directly reduce the opportunity cost of holding non-yielding assets like gold. This transmission mechanism enhances gold’s attractiveness and is a key factor supporting the upward movement of gold prices.

Political Factors May Constitute Short-Term Variables

On the other hand, progress in resolving the U.S. government shutdown also influences market sentiment. Recent reports indicate that the Senate has passed a temporary funding measure supported by moderate Democrats, which is expected to end the record-breaking government shutdown on Wednesday. This spending plan will keep most government departments operational until January 30. Once the government shutdown is lifted, risk sentiment may improve, and the gold market as a safe-haven asset could face a pullback. Investors should closely monitor political negotiations and their impact on the gold market.

Gold Market Outlook

Currently, the gold market is supported by weak employment data and rising expectations of rate cuts. In the short term, it may continue to test the upside resistance at $4,150. However, the dissipation of political risks could pose a barrier. Investors should continue to monitor economic data releases and policy expectations to grasp the further direction of the gold market.