Gold consolidates below $3,650 amid safe-haven demand, rate cut bets
- Gold consolidates below $3,650, holding in a narrow range after this week’s record high near $3,675.
- Safe-haven demand remains strong, driven by global trade tension and geopolitical risk.
- Markets have fully priced in a 25 bps cut at the Fed’s September 17 meeting, a +90% probability says CME Fedwatch Tool.
Gold (XAU/USD) is trading with a mild positive tone on Friday, consolidating near $3,650 mark after rebounding from Thursday’s pullback. The precious metal remains stuck in a narrow range after notching an all-time high near $3,675 earlier this week.
Despite the sideways price action, Gold is on course for a fourth straight weekly gain, supported by a broadly weaker US Dollar (USD) and the growing conviction that the Federal Reserve (Fed) will cut rates at next week’s meeting.
The latest batch of US data has given the Fed plenty of reasons to ease monetary policy. August Consumer Price Index (CPI) confirmed that headline inflation remains slightly hot, but the broader narrative is one of a cooling economy. Nonfarm Payrolls (NFP) nearly stalled in August, earlier job growth has been revised sharply lower, and Initial Jobless Claims have climbed to multi-year highs. At the same time, producer price pressure has softened.
Together, these indicators have overshadowed lingering inflation concerns and underscored that downside risks to employment are increasing, making a Fed rate cut next week all but certain.
Beyond the US outlook, broader market factors also continue to favor the metal. Persistent geopolitical tension and trade friction tied to US tariffs are keeping safe-haven demand alive, reinforcing a broadly bullish outlook for Gold.
Market movers: Gold steadies amid sticky inflation, soft labor data
- US inflation picked up in August, with headline CPI rising 0.4% on the month after a 0.2% increase in July, coming in slightly above the 0.3% forecast. On an annual basis, headline inflation rose by 2.9%, matching expectations and up from 2.7% previously. Core CPI, which excludes food and energy, held steady at 0.3% MoM and 3.1% YoY, the same as July and fully in-line with forecasts.
- US weekly Initial Jobless Claims surged to 263,000 in the week ending September 6, marking the highest level in almost four years. The four-week moving average also climbed to around 240,500, pointing to a clear upward trend in layoffs. While Continuing Jobless Claims held near 1.94 million, the steady rise in new applications highlights mounting pressure in the labor market and adds to the case for a Fed rate cut at next week’s meeting.
- The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is stabilizing after Thursday’s pullback. The index is trading around 97.66, up roughly 0.12% on the day. The modest rebound in the Greenback is acting as a headwind for Gold, limiting the metal’s upside potential.
- US tariff revenues jumped to an all-time high of about $30 billion in August, marking the first full month under US President Donald Trump’s reciprocal tariff regime.
- The Financial Times reported on Thursday that the US is pushing G7 allies to impose steep tariffs on China and India over their continued purchases of Russian oil, aiming to apply economic pressure on Moscow and force it into peace talks.
- Later on Friday, the preliminary University of Michigan survey will offer a fresh read on household confidence and inflation expectations. The headline Consumer Sentiment Index is forecast at 58.0, down slightly from 58.2 in August, while the Consumer Expectations Index is projected at 54.9 compared with 55.9 previously.
Technical analysis: XAU/USD consolidates below record highs
XAU/USD is consolidating on the 4-hour chart just below its all-time high near $3,675. Price action has been confined to a narrow band between $3,620 and $3,650 in recent sessions, reflecting a pause in momentum after the strong rally earlier this week.
The 21-period Simple Moving Average (SMA), currently near $3,640, is acting as immediate support, while the 50-period SMA around $3,596 provides a stronger cushion, which closely aligns with the $3,600 psychological level. On the upside, immediate resistance is located at the upper end of the current range near $3,650, followed by the record high at $3,675. A clear break above this zone could open the path to the psychological $3,700 level.
Momentum indicators are consistent with consolidation within an ongoing bullish trend. The RSI is holding around 61 after slipping back toward neutral levels on Thursday, indicating that momentum has stabilized in positive territory and that buyers have not given up control. The ADX remains elevated around 42, signaling that the underlying trend is still strong even if directional strength has moderated slightly.
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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