Gold soared to an all-time high of $3,600 on Friday after disappointing US Nonfarm Payrolls (NFP) data fueled speculations of Federal Reserve rate reductions. The report released 22,000 jobs in August, short of expectations, and sent the unemployment rate to 4.3%, while wage growth stagnated. As a response, US Treasury yields fell, the US Dollar lost value, and investors rushed towards the safety of Gold. Concerns from the market regarding Fed independence, combined with speculation of a possible 50-basis-point reduction by analysts, helped sustain bullion’s rally before next week’s release of the US Consumer Price Index (CPI).
KEY LOOKOUTS
• Next week’s CPI data will be closely monitored by investors to determine inflation patterns and likely Fed rate cuts.
• Expectations of a 25–50 bps rate reduction will shape Gold’s short-term course.
• Dropping yields and a weak Dollar continue to propel Gold’s bullish trend.
• Gold is at major resistance of $3,650 and $3,700, while a fall below $3,600 would potentially pave the way to $3,511 and $3,500.
Gold reached an all-time high at $3,600 as weak US labor market statistics kindled hopes of near-term Federal Reserve rate cuts. The August Nonfarm Payrolls report was disappointing with a mere 22,000 jobs being added, nudging unemployment upwards while leaving wage growth unchanged. Declining Treasury yields and a weakening US Dollar added to the bullion’s safe-haven appeal. Market fear of Fed independence, as well as hopes of a potential 50-basis-point reduction, has supported Gold’s positive bias before next week’s US Consumer Price Index (CPI) release.
Gold broke the all-time high at $3,600 following dismal US jobs numbers that increased prospects of Fed interest rate reductions. Declining Treasury yields and weaker Dollar powered the rally, with markets now looking towards next week’s CPI release for direction.
• Gold touched an all-time high of $3,600 after soft US Nonfarm Payrolls data.
• August jobs report reported adding just 22,000 jobs, below estimates of 75,000.
• US unemployment rate increased to 4.3%, while wage growth stabilized at 0.3% MoM.
• US Treasury yields, particularly the 2-year note, plummeted hard, increasing Gold’s attractiveness.
• The US Dollar Index (DXY) fell 0.70% due to risk-off flows.
• Potential Fed rate cuts of 50 bps or so are anticipated by analysts, such as Standard Chartered.
• Gold near-term technical resistance is at $3,650 and $3,700, with near-term support at $3,511–$3,500.
Gold jumped to a record $3,600 as softer-than-forecast US labor market data fueled speculation the Federal Reserve will restart rate cuts. The August Nonfarm Payrolls report indicated just 22,000 jobs added, below forecasts, and the unemployment rate increased to 4.3% and wage growth was steady. Disappointing jobs numbers raised concerns about the health of the US economy, and investors turned to the safety of Gold.
XAU/USD DAILY CHART PRICE
SOURCE: TradingView
Market sentiment was also impacted by declining Treasury yields and a softer US Dollar, both of which benefited bullion’s attractiveness. Analysts such as those at Standard Chartered emphasized prospects for material Fed easing over the next few months, enhancing expectations for rate cuts before next week’s US Consumer Price Index (CPI) report. Political uncertainty with regard to the Fed’s independence contributed further to the bearish outlook for Gold.
TECHNICAL ANALYSIS
Gold’s technical bias is strongly bullish following a break above the $3,600 level, indicating a strong uptrend. The immediate levels to watch for resistance are $3,650 and $3,700, where profit-taking might occur. On the bearish side, a close below $3,600 on the daily chart might open up support at $3,511, and then come the psychological $3,500 level. On a general basis, the trend indicates that the bulls are dominant, and additional gains are expected if Gold manages to hold above support levels.
FORECAST
Gold is expected to remain on a rising course in the short term if market sentiment is supportive. On expectations of Fed interest rate cuts and a softer US Dollar, prices have the potential to test resistance levels around $3,650 and even $3,700. The positive momentum can continue as investors look to safe-haven assets in anticipation of key US economic data.
But negative risks persist if Gold cannot stay above $3,600. A sustained decline below this may push prices into correction to $3,511, then $3,500, as investors may take profits or respond to better-than-forecast US economic statistics. Reactions of markets to the US Consumer Price Index (CPI) announcement will be pivotal to deciding the next way forward.
