Gold extends record-breaking rally on Fed easing expectations, safe-haven demand
- Gold hits a fresh all-time high at $3,728 on Monday, extending gains for a sixth straight week.
- US Dollar and Treasury yields ease at the start of the week, adding fresh support to bullion.
- Fed Chair Jerome Powell speaks on Tuesday, alongside several other Fed officials throughout the week.
Gold (XAU/USD) continues its record-breaking rally on Monday, extending gains for the sixth straight week as dovish Federal Reserve (Fed) expectations and robust safe-haven flows keep demand elevated. At the time of writing, XAU/USD is trading around $3,715 after setting a fresh all-time high at $3,728 earlier in the day.
The latest leg higher is underpinned by growing market conviction that the Fed could deliver additional easing before year-end. While last week’s 25 basis points (bps) interest rate cut by the central bank was widely anticipated, investors are increasingly pricing in the possibility of two more reductions in October and December, even as Fed Chair Jerome Powell has stressed that future policy moves remain data-dependent.
Gold’s rally shows no signs of slowing, with the metal up more than 40% year-to-date as a combination of global risks drives demand. Beyond the expectations of further Fed easing, persistent geopolitical tensions, ongoing central bank accumulation, robust inflows into Gold-backed Exchange Traded Funds (ETFs), and uncertainty surrounding US tariff policy have all added momentum to bullion’s record-breaking run.
Looking ahead, no major US economic data is scheduled for release on Monday, but all eyes will be on a wave of Fed speeches due later in the day. Market participants will parse remarks from New York Fed President John Williams, along with speeches from St. Louis Fed President Alberto Musalem, Richmond Fed President Thomas Barkin, Fed Governor Adriana Hammack, and Fed Governor Stephen Miran for signals on how policymakers are assessing the evolving economic outlook after last week’s cautious rate cut.
Market movers: Busy US calendar ahead with Powell, GDP, and PCE in focus
- On Wednesday, the Federal Open Market Committee (FOMC) lowered the federal funds rate by 25 basis points to a target range of 4.00%-4.25%. In its statement, the Fed said that economic activity has moderated in recent months and that job growth is slowing as labor market conditions soften. Policymakers highlighted that inflation has come down from its highs but is still above the 2% goal, while also warning that risks to employment are becoming more pronounced.
- The latest CFTC Commitments of Traders (COT) report, published on Friday for the week ending September 16, showed speculators holding a net long position of 266,410 contracts in Gold (COMEX futures). Long positions increased by 1,903 contracts, while shorts declined by 2,767 contracts.
- Commercial hedgers added 33,013 new short positions, and total open interest rose by 6,596 contracts to 516,221. The data points to fresh inflows into the futures market as Gold trades at record highs, with commercials ramping up hedging activity against further price gains.
- The US Dollar (USD) and Treasury yields ease on Monday, snapping a three-day winning streak. The US Dollar index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering near 97.50, while yields remain subdued across the curve, adding fresh support to Gold at record highs.
- This week’s US economic calendar is packed with key events. On Tuesday, September preliminaries S&P Global Purchasing Managers Indexes (PMIs) will be released, alongside remarks from Fed Chair Jerome Powell and other policymakers. On Thursday, attention will shift to the second-quarter annualized Gross Domestic Product (GDP), Durable Goods Orders, and the weekly Initial Jobless Claims. The week will conclude on Friday with the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, while several other Fed officials are also scheduled to cross the wires throughout the week.
Technical analysis: XAU/USD extends record-breaking run, key support at $3,700
XAU/USD is trading at record highs after breaking above its previous peak at $3,703, confirming bullish momentum. The breakout has extended the metal’s record-breaking rally, with buyers firmly in control as it pushes into uncharted territory.
On the downside, immediate support is now seen at $3,700, which has turned into a key pivot after the breakout above $3,703. The 21-period Simple Moving Average (SMA) on the 4-hour chart around $3,673 offers the next cushion, while a stronger floor lies near $3,630, which marks the base of the prior consolidation zone, reinforced by the 100-period SMA at $3,611.
Momentum indicators back the bullish case. The Relative Strength Index (RSI) is holding above 70, signaling strong upward momentum even as conditions stretch into overbought territory. The Moving Average Convergence Divergence (MACD) is also trending higher, with widening green histogram bars suggesting continued positive momentum. As long as Gold stays above $3,700, bulls are likely to target further gains toward fresh record levels.
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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