International spot gold prices have held steady following the release of U.S. employment data, and Joni Teves, precious metals strategist at UBS Global Research, noted that gold's resilience after the jobs report does not mean interest rates have lost their relevance, but rather that the market has already priced in a significant amount of expected monetary policy tightening. The firm believes that even if the Federal Reserve raises rates in September, gold prices may see a brief pullback, but the decline is expected to be limited, and the overall recovery trend is unlikely to be disrupted.

With roughly a 90% probability of a rate hike this week, Teves commented that gold prices will initially move lower after a hike, influenced by real interest rates and dollar movements. However, the downside is likely to be cushioned, as institutional investors seeking to build strategic positions and central banks are expected to buy on dips, while seasonal physical demand is also set to provide support.

If the Fed ultimately decides not to raise rates, investors could also chase gold higher. This is particularly true if the market perceives such a decision as increasing the risk of monetary policy errors or reigniting questions about the Fed's independence. In that scenario, the easing of short-term rate pressures would combine with long-term portfolio diversification considerations, creating a stronger upside for gold prices.

In other words, while gold may remain vulnerable to hawkish surprises, it appears to be becoming increasingly sensitive to positive catalysts. UBS also highlighted that China added roughly 20 tonnes of gold in August, bringing its year-to-date purchases to about 80 tonnes, reflecting that official sector buying continues at a historically significant pace.

Additionally, with Chinese investment demand gradually recovering and India's peak gold demand season approaching, seasonal factors are expected to support the gold market in the fourth quarter. Teves said that while the risks facing gold prices are currently two-sided, the upside risks are more pronounced. With seasonal demand approaching, a gradual rebuild in gold ETFs, sustained central bank buying, and support from Chinese investment channels, volatility may increase in the near term, but the risk-reward profile is increasingly skewed to the upside heading into year-end.