Gold prices edged higher on Thursday as softer-than-expected US inflation data reduced bets for a Federal Reserve rate hike in October, while investors await key US jobs data due later this week.

Gold found a measure of support today, offering a welcome reprieve after a bruising September in which prices fell more than 6%. The catalyst came from Wednesday's inflation report, which showed US price pressures rising less than expected in August, with the prior month's figures also revised lower.

That softer data meaningfully reshaped expectations for the Federal Reserve. According to the CME FedWatch tool, markets are now pricing in a 31% probability of an October rate hike, down from 45% before the release and sharply lower than the 69% priced in just one week ago. David Meger, director of metals trading at High Ridge Futures, credited those lower rate hike expectations with supporting the precious metals complex.

However, gold's advance was capped by persistent headwinds. The 10-year US Treasury yield climbed to its highest level in more than two decades, raising the opportunity cost of holding a non-yielding asset like gold. At the same time, a firmer dollar made bullion more expensive for buyers holding other currencies.

Energy markets added another layer of pressure. Oil prices rose after China suspended exports of oil products, a move that could further tighten fuel markets already struggling with global supply shortages. This is a clear example of the dynamic I have been highlighting: rising crude now feeds directly into inflation expectations and, in turn, into a more hawkish Fed outlook, which weighs on gold rather than lifting it as a traditional safe haven. Meger echoed this view, cautioning that further gains in energy prices or an escalation in the Middle East would raise the odds of a hike and dent sentiment toward gold.

All eyes now turn to Friday's September nonfarm payrolls report, which will offer critical insight into the Fed's next move. Achilleas Georgolopoulos, senior market analyst at XM Trading, noted that while weaker risk appetite and reduced hike expectations have helped gold, the short-term trend remains bearish. He sees a retest of $4,000 as a real possibility, particularly if the jobs report comes in stronger than expected.

Longer term, the outlook carries a more constructive tone. HSBC lowered its average gold price forecasts to $4,490 per ounce for 2026 and $4,825 per ounce for 2027. While the bank warned that gold could face additional near-term pressure, it also believes the metal is likely nearing a bottom. Importantly, HSBC expects central banks to step back in as buyers on price weakness, particularly near or below the $4,000 level, a development that could provide a meaningful floor beneath the market.

Wishing you, as always, good trading,