gold prices remain elevated near the recent record highs of around $3,600, consolidating after a substantial rally driven by risk-averse investor sentiment. The precious metal’s resilience reflects ongoing geopolitical tensions, notably Russia’s intensified military actions in Ukraine, coupled with persistent dovish expectations regarding U.S. monetary policy. Despite a slight retreat from intraday peaks, gold maintains its appeal amid expectations that the Federal Reserve may adopt a more accommodative stance in response to economic data.
The latest U.S. labor report underscored a significant slowdown in employment growth, with nonfarm payrolls rising by only 22,000 in August — far below the forecasted figures — and the unemployment rate creeping up to 4.3%, the highest since late 2021. These figures bolster predictions of a potential interest rate cut in the upcoming policy meeting. Meanwhile, geopolitical developments remain a source of cautious optimism for gold investors; reports of increased gold purchases by China’s central bank in August signify sustained central bank appetite for bullion, supporting the metal’s core safe-haven appeal.
However, a notable rebound in the U.S. dollar, driven by a sharp surge in USD/JPY amidst political uncertainties in Japan, has introduced fresh headwinds to gold ’s rally. The yen’s decline followed Prime Minister Shigeru Ishiba’s resignation amid domestic political struggles, while China’s moderating import growth in August raised concerns over its economic growth trajectory — factors that could temper gold ’s upside potential. As markets brace for upcoming U.S. inflation data — specifically the Consumer Price Index and Producer Price Index — traders are likely to reassess their long positions, pending further clarity on the economy’s inflation trajectory.
From a technical standpoint, the recent overbought conditions indicated by the relative strength index suggest a possible short-term correction. Should gold experience a correction below support levels around $3,550, a deeper pullback toward the September lows of approximately $3,511 could occur. Conversely, a hold above current levels, reinforced by a bullish moving average crossover, may preserve the upward trend towards the psychological resistance at $3,650, with traders closely watching the $3,600 mark as a pivotal level for continued strength.
