Gold Nears Record as Fed Signals More Cuts (06 - 10 October)

The dollar index dropped to 97.7, down 0.5% for the week, as soft private labor data, stagnant ISM services, and a government shutdown disrupted markets and reinforced expectations of two more Fed cuts this year. Markets grew increasingly concerned over slowing growth and job market weakness, especially as the BLS jobs report was delayed.

Gold climbed to $3,875, just shy of its all-time high of $3,897, notching a seventh consecutive weekly gain, supported by safe-haven demand, a dovish Fed, and geopolitical risk. Silver held below $47, still tracking for a weekly gain.

The 10-year US Treasury yield stood at 4.10%, down 7 bps this week, as softer labor market data and shutdown-driven uncertainty spurred demand for Treasuries.

Market Drivers and Catalysts

• Currencies: Dollar weakens on soft jobs data and shutdown; euro steady; pound flat; yen slips
• Commodities: Gold nears record high; silver supported by rate cut bets; oil volatile on supply signals
• Fixed Income: US yields fall on weaker data; gilt yields rise on UK policy uncertainty; Bunds firm on ECB–Fed divergence
• Macro events: ADP payrolls, ISM Services, jobless claims, Eurozone CPI, JOLTS
• Macro headlines: Fed seen delivering two more cuts; shutdown delays BLS data; inflation sticks despite growth risks

Fixed Income

• US: The 10-year yield closed at 4.10%, falling 7 bps on the week amid soft ADP, a flat ISM Services PMI, and slowing quits/hiring metrics. With the BLS jobs report delayed, markets leaned heavily on private indicators, which pointed to labor market softness. Fed futures now price in two 25 bps cuts by year-end, despite sticky inflation and a political standoff.
• UK: The 10-year gilt yield climbed to 4.70%, as policy divergence with the Fed and domestic fiscal uncertainty weighed. Chancellor Rachel Reeves is expected to remove the two-child benefit cap in November at a cost of £3.5bn/year, potentially funded by tax hikes. BoE officials remain split: Mann warned of sticky inflation, while Breeden urged caution.
• Japan: The 10-year JGB yield remained elevated at 1.66%, near a 15-year high, following remarks from BoJ Governor Ueda that rate hikes remain possible if growth and inflation align. August unemployment rose to 2.6%, while exporters face US tariff pressure. Markets await the ruling party leadership vote to clarify fiscal and monetary direction.
• Germany: The 10-year Bund yield stayed near 2.70% as investors digested the ECB’s hold and divergence from Fed policy. Eurozone CPI rose to 2.2%, slightly above target, while PMIs indicated sluggish growth. A weak Bund auction showed tepid demand, with a 1.2 bid-to-cover ratio, the lowest this year.

Commodities

Gold rose to $3,875 per ounce, extending its YTD gain to 48%, the best performance since 1979. The rally was driven by safe-haven flows amid the US government shutdown, falling private payrolls, and Fed cut expectations. With the nonfarm payrolls report delayed, investors turned to ADP data, which showed a 32,000 job decline, and stagnant ISM Services.

Silver held under $47, still set for a seventh straight weekly gain, supported by Fed rate cut bets and fiscal uncertainty. Market participants fully price in a September cut, with another expected by December. A projected global silver deficit for the fifth straight year also added support.

Currencies

• Dollar: The dollar index fell to 97.7, pressured by a softening labor market, weaker ISM services, and shutdown uncertainty. The lack of an official BLS report forced reliance on private data, which showed notable weakness in hiring and business activity. Traders now expect two more Fed cuts by year-end.
• Euro: The euro held above $1.17, staying near last month’s four-year high of $1.192, as Eurozone inflation rose to 2.2%, keeping the ECB cautious. With the Fed seen easing again, and the ECB on hold, diverging policy paths are keeping EUR/USD in focus.
• Pound: The pound hovered around $1.35, flat for the week. Markets shifted attention to UK fiscal policy, with November’s budget expected to include tax increases. The BoE remains sidelined until 2026, as inflation remains elevated, particularly in food and regulated prices.
• Yen: The yen weakened to 147.5, reversing recent gains as investors turned cautious ahead of the LDP leadership vote. Unemployment rose to 2.6%, and the BoJ outlook remains unclear, though Governor Ueda reiterated hikes remain on the table if data align.

Macro Calendar Highlights (Times in GMT)

• 12:30 – US ADP Employment Change (Sep)
• 14:00 – US ISM Services PMI (Sep)
• 12:30 – US Core PCE Price Index (Aug) (earlier week)
• 09:00 – Eurozone CPI YoY (Sep)
• 04:30 – Japan Jobless Rate (Aug)
• BLS Nonfarm Payrolls delayed due to shutdown