Gold prices plummet, is it worth worrying about?

Gold faced some selling pressure on Friday after data from the U.S. Bureau of Labor Statistics showed strong economic activity created 254,000 jobs last month. September nonfarm payrolls data beat expectations by 147,000. Meanwhile, wages rose more than expected, rising 0.4% last month.

Before the report, markets had priced in a 30% chance of a 50 basis point rate cut by the Federal Reserve next month. However, those expectations have now all but evaporated. The dollar has rallied on shifting monetary policy expectations, putting pressure on the precious metal.

However, according to some experts, gold prices are still holding firm. Analysts note that economic data has lost its importance due to geopolitical instability.

“Gold is rallying for one reason only, the risk of events over the weekend in the Middle East,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Israel's war in the Middle East continues to escalate as its military launches airstrikes against Hamas in Gaza and Hezbollah in Lebanon. There are concerns that Iran could move further into the conflict. Many are now asking how Israel will retaliate against Iran.

With a relatively light economic calendar next week, Lukman Otunuga, chief market analyst, said gold will be caught between solid economic data and turmoil in the Middle East.

“Looking at the technical picture, gold is supported at $2,630/oz and resistance at $2,675/oz. A breakout could be imminent, with events in the coming week acting as catalysts. These include ongoing geopolitical tensions, important US data including CPI and speeches by several Fed officials,” he said.

Although gold prices remain below $2,700 an ounce, Colombo noted that gold is still in a strong uptrend.

He added that, along with rising geopolitical uncertainty and a new Fed easing cycle, global liquidity is increasing, making gold an attractive asset. Gold is also becoming more attractive as global debt continues to rise.

Although the possibility of a 50 basis point cut by the Fed is no longer there, analysts say the Fed's overall monetary policy stance remains bullish for gold prices.

“The general direction remains the same, the market believes the Fed will continue to cut rates until they get down to around 3%. That will support gold,” said David Morrison, senior market analyst at Trade Nation.

There is not much economic data next week, the most interesting event will be the US consumer price index for September. According to economists, the market will be eager to see whether inflationary pressures continue to decline, which will support the Fed's easing cycle.