Gold rally cools as traders look past jobs miss to looming Fed taper

October 8, 2021

New York (Oct 8) - Gold steadied on Friday, paring gains from a more than 1% rally fuelled by a miss in the U.S. jobs data, as investors came to terms with the possibility that the Federal Reserve may still have enough fodder to wean the economy off stimulus this year.

Spot gold was up 0.1% at $1,757.39 per ounce by 11:46 am ET (1546 GMT), retreating from their highest since Sept. 22 at $1,781.20.


U.S. gold futures fell 0.1% to $1,757.60.

Spot silver rose 0.6% to $22.71.

U.S. employers added just 194,000 jobs in September, well below expectations. But upward revisions to prior months’ data meant the economy has now regained half of the jobs deficit it faced in December.

Gold gained sharply as the data at first appeared to be downbeat, but internals of the report seemed “overall to be not so bad,” said Jim Wyckoff, senior analyst at Kitco Metals.

This drove expectations that the Fed will “continue on its path of wanting to taper monetary policy sooner, rather than later,” leading to the retreat in gold, although yet another poor jobs report next month could change that, Wyckoff added.


Gold was also caught between headwinds from higher U.S. Treasury yields, and some support from a slightly weaker dollar.

The gold market now seems to have reverted to expecting a tapering announcement at some point this year, said Standard Chartered analyst Suki Cooper.

“However, the downside appears well-supported, given the demand response from the physical market.”

Reduced stimulus and higher interest rates lift bond yields, translating into increased opportunity costs of holding non-yielding bullion.

“For the gold narrative to really pickup again, we’d need an impulsive rally above $1,950-60, or the pre-COVID-vaccine-highs and that would require a significant catalyst not in the market right now,” said a New-York based precious metals trader.

But autocatalysts platinum and palladium held on to gains, rising 4.2% to $1,020.04, and 5.1% to $2,060.26 respectively, likely buoyed by the positive fine print in the jobs report.


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