【TMGM Financial Recap】Nonfarm Payrolls Ahead: Investors Watch Whether Gold Can Sustain Its Rally Towards $4,200!

Gold rallied on Thursday to its highest level in more than two weeks, taking this week’s rebound to over $200. Market sentiment shifted from pessimism to cautious optimism, supported by several converging factors. On Friday, spot gold traded within a narrow range as attention turned to the US October nonfarm payrolls report due later in the day.

The immediate drivers of this rally have been simultaneous declines in the dollar and US Treasury yields. The US Dollar Index hovered near its lowest level since September 30, making dollar-denominated gold cheaper for investors holding other currencies. Meanwhile, the 10-year US Treasury yield fell to a nearly two-month low, significantly reducing the opportunity cost of holding non-yielding gold.

Markets do not believe expectations of interest rate hikes have disappeared entirely. Rather, weaker energy prices have eased inflation concerns, potentially reducing the need for future rate increases. This subtle shift in expectations has been enough to give gold some breathing room in the short term. Wednesday’s oil price plunge further reinforced the narrative that inflationary pressures could ease temporarily.

Alongside gold’s advance came the latest remarks from Federal Reserve officials. The presidents of the Cleveland and Richmond Federal Reserve Banks both publicly supported gradual rate increases on Thursday. They stressed that monetary policy needs to move into restrictive territory to bring inflation back to the 2% target in a timely manner, but favoured more frequent, smaller adjustments to minimise disruption to households, businesses and financial markets.

A deeper driver has been the outcome of the US midterm elections. After Democrats regained control of Congress, markets quickly adjusted their expectations for the situation in Iran and the outlook for artificial intelligence investment. Wednesday’s sharp oil price decline largely reflected bets that the political shift could reduce the risk of further escalation in the US–Iran conflict. However, oil prices rebounded on Thursday, suggesting that optimism over a swift end to the war had cooled somewhat.

Meanwhile, technology stocks, particularly AI-related sectors, suffered heavy losses. The Nasdaq pulled back sharply amid concerns that local opposition and tighter approval processes could slow data centre construction, affecting capital expenditure and economic growth momentum over the next year or two.

Market Insight:

Together, these developments suggest that short-term inflationary pressures could ease somewhat as oil prices fluctuate and investment slows, although the longer-term outlook remains highly uncertain. As an asset that hedges against inflation, geopolitical risks and currency depreciation, gold often attracts capital during such periods of uncertainty.

Investors are now focused on Friday’s US nonfarm payrolls report. Significantly weaker data could further reduce expectations of a December rate hike, providing additional upward momentum for gold. Strong data, however, could reinforce the case for continued Fed tightening and weigh on gold prices.