Gold price surges on speculation of September Fed rate cut following weak US jobs data
- Gold gains 0.39% to $3,375 on rising Fed cut expectations after soft NFP print.
- May–June payrolls revised down by 258K last Friday, sparking renewed dovish shift.
- US 10-year yield falls to 4.20%, extending last week’s 16 bps drop.
Gold price posted modest gains on Monday as expectations that the Federal Reserve (Fed) could cut interest rates rose since last Friday, following last Friday's dismal US Nonfarm Payrolls report. The XAU/USD trades at $3,375, edges up 0.39%.
Expectations that the Fed might cut interest rates are boosting the yellow metal. The odds for the September 17 meeting rate cut are 87%.
Last week’s jobs data revealed the first cracks of a deteriorating labor market. The US Bureau of Labor Statistics (BLS) revised down May and June figures by 258K. Hence, the data vindicated Fed Governor Christopher Waller, who shifted dovishly as he made comments that tariff inflation would be transitory and expressed concerns about achieving the maximum employment mandate.
US Treasury yields are down during the session, a tailwind for the non-yielding metal. The US 10-year T-note is down one basis point (bp) to 4.20%, extending its losses after Friday’s 16-basis-point plunge.
The US Dollar, as depicted by the US Dollar Index (DXY) that tracks the performance of the buck’s value against a basket of six peers, trims some of its earlier gains and is up 0.07% at 98.74.
US Trade Representative Jamieson Greer said that tariffs imposed by US President Trump last week are likely to remain in place as part of continuing negotiations. Last week, Canada, Brazil, India, Taiwan and Switzerland were hit by tariffs between 20% to 39%.
Data revealed that Factory Orders tanked while traders await the release of ISM Services PMI, Jobless Claims, Consumer Sentiment data and Fed speakers.
Daily digest market movers: Gold edges up as manufacturing activity shows signs of slowing
- Factory Orders in June plummeted as commercial aircraft orders plunged, with the print coming at -4.8% MoM as expected, well below May’s 8.2% expansion. Manufacturing activity remains constrained due to tariffs, which triggered a rise in input costs.
- Also, the ISM Manufacturing PMI contracted last week, resuming its downward trend for the second consecutive month.
- Meanwhile, Consumer Sentiment improved by 61.7, though it ticked a tenth lower than the preliminary reading from the University of Michigan (UoM) survey on American households. Inflation Expectations remained within familiar levels at 4.5% for one year and 3.4% for five years.
- Citi updated its Gold forecast for the next three months from $3,300 to $3,500 per troy ounce on Monday. They mentioned in the note that “US growth and tariff-related inflation concerns are set to remain elevated during 2H’25, which, alongside a weaker dollar, are set to drive gold moderately higher, to new all-time highs.”
XAU/USD technical outlook: Gold price remains bullish as buyers eye $3,400
After climbing above the confluence of the 50-day and 20-day Simple Moving Averages (SMAs) at $3,342, Gold cleared the $3,350 level as buyers eye a test of the $3,400 mark. Citi’s upward revision to the XAU/USD price could sponsor a re-test of the June 16 peak of $3,452, before bulls assault the year-to-date (YTD) high of $3,500.
On the flip side, if XAU/USD drops below $3,342, the next support would be $3,300, ahead of the 100-day SMA at $3,263.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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