GLOBAL BULLION TRACKER — METALS BRIEF

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Gold is starting the week modestly higher near $4,160 an ounce, while silver is rebounding more sharply near $61.80.

The biggest change since Thursday is the labor market.

September payrolls increased by only 29,000, far below expectations near 90,000. August was revised down to 133,000 from 162,000, while July was revised to a loss of 10,000 jobs. The unemployment rate edged up to 4.2%.

That report dramatically changed expectations for the Federal Reserve.

Markets now assign only about an 18% probability of an October rate increase, down from roughly 70% earlier last week. A December increase remains much more plausible, with markets still pricing roughly a 69% probability.

Yet gold has not responded the way many investors might expect.

That is the most important story in metals right now.

Gold initially jumped after Friday’s weak employment report, but the rally quickly faded.

Despite a sharply lower probability of another Fed hike this month, long-term Treasury yields remained elevated and the dollar stayed firm.

That combination continues to pressure precious metals.

Gold finished last week near $4,140, while silver closed around $60.36. Both are recovering this morning, but neither has erased the damage from September.

The market appears to be distinguishing between two different interest-rate stories.

The Fed controls short-term rates.

The bond market controls long-term borrowing costs.

Right now, the second story may matter more.

The 10-year Treasury yield remains around 5.25%–5.30%, keeping the opportunity cost of holding gold unusually high.

Even after softer inflation data and a weak jobs report, investors continue demanding high yields on long-duration U.S. debt.

That is significant because it means financial conditions can remain tight even if the Federal Reserve pauses in October.

Higher Treasury yields affect mortgages, corporate borrowing, government financing and investment decisions throughout the economy.

For gold, they also provide investors with a high-yielding alternative to an asset that pays no interest.

That is why the gold market’s inability to sustain Friday’s rally deserves attention.

One of the most unusual developments in the gold market came during September.

Gold fell by more than 8% during the month, yet global gold-backed ETFs added more than 70 tonnes.

At the same time, COMEX managed-money positions fell by the equivalent of 84 tonnes.

The World Gold Council says it has not previously observed a month combining a gold-price decline and ETF accumulation of those magnitudes.

That divergence helps explain what has been happening beneath the surface.

Longer-term investors appear to be buying weakness through ETFs, while leveraged futures traders have been reducing exposure.

It is an important distinction.

The price is falling, but not every segment of the market is selling.

Gold also received an important vote of confidence Monday from central bankers attending the London Bullion Market Association conference.

Officials from the Bank of Italy and Bundesbank reaffirmed gold’s role as a reserve asset despite sharply higher bond yields.

Bundesbank President Joachim Nagel acknowledged that higher yields make government bonds more attractive, but said elevated sovereign debt and credit risks continue to support diversification into gold.

The Bank of Italy also pointed to a structural change in the gold market since 2022, with stronger central-bank buying weakening the traditional relationship between gold and real interest rates.

That gets to the heart of the current gold debate.

High Treasury yields are a short-term headwind.

But if those yields remain high because investors are increasingly concerned about debt, deficits or sovereign credit risk, gold can ultimately benefit from the same forces weighing on it today.

Silver is outperforming gold Monday morning, rising about 2.3% to roughly $61.80. Platinum and palladium are also higher.

The rebound is encouraging, but silver remains well below the levels it traded at only a few weeks ago.

The former $64–$65 support zone is now the first meaningful resistance area.

A move back above that range would improve the technical picture.

Failure to reclaim it would leave silver vulnerable to another test of the $60 area.

The longer-term silver supply story remains constructive, but macro forces — particularly yields and the dollar — are still setting the tone.

One important change from last week is oil.

Energy prices are falling Monday as Middle East crude exports improve and additional inventories reach the market.

That eases some of the inflation pressure that had been pushing bond yields higher and strengthening the case for additional Fed tightening.

Geopolitical risks have not disappeared, however.

Tensions remain elevated around Yemen and broader Middle East shipping routes, so energy prices could quickly return as a metals-market catalyst.

For now, lower oil is mildly supportive for the Fed-hold argument.

The next major clue comes from the Federal Reserve’s September meeting minutes, which could provide more detail on how policymakers view inflation, employment and the need for additional tightening.

The bigger issue, however, may remain the Treasury market.

If weaker labor data continues while long-term yields stay above 5%, investors will increasingly have to ask why borrowing costs remain so high.

That answer matters enormously for gold.

If yields remain elevated because of strong growth, gold faces a difficult environment.

If they remain elevated because investors are demanding more compensation for inflation, debt and fiscal risk, the longer-term case for gold may strengthen.

Friday’s jobs report changed the Fed debate.

Just 29,000 jobs were added in September, unemployment rose to 4.2%, and the probability of an October rate hike collapsed.

Yet gold could not hold its initial rally.

That tells us the market’s attention has shifted beyond the next Fed meeting.

Long-term Treasury yields and the dollar remain the primary near-term headwinds for precious metals.

At the same time, the underlying gold market is sending a different message: ETF investors bought more than 70 tonnes during September, central banks continue to defend gold’s reserve role, and concerns around U.S. debt remain firmly in the background.

For now, the tension is clear:

The Fed is becoming less hawkish — but the bond market still is.

Sources: U.S. Bureau of Labor Statistics, Federal Reserve, World Gold Council, Reuters, London Bullion Market Association, Global Bullion Tracker.

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For informational purposes only. Nothing in this publication constitutes investment advice.