Gold extends bull run on sticky inflation, soft labour data, and Fed cut bets

Gold (XAUUSD) has surged to historic highs as markets brace for key central bank decisions. The combination of weak job numbers and political pressure is forcing the Federal Reserve to cut rates. President Trump has renewed calls for deeper rate cuts, amplifying political pressure on the Fed. Inflation remains sticky, while consumer sentiment is slipping. Together, these factors support more easing and fuel gold’s bullish momentum. Gold’s breakout beyond $3,500 validates the shift into a more aggressive upward trend.

Gold breaks higher as markets anticipate Fed easing and economic weakness

Gold has risen sharply as central bank meetings come into focus, with the Federal Reserve leading the spotlight. Currently, markets are fully pricing in a 25-basis-point rate cut, though a minority still see a chance of a larger 50-bps move. In addition, President Trump increased pressure on the Fed by calling for a sharper rate cut. His comments underscore the growing political influence over the Fed’s policy direction. Meanwhile, Stephen Miran’s possible confirmation to the Fed Board may also strengthen the case for deeper policy easing.

Recent U.S. economic data strongly support the case for easing. The August Nonfarm Payrolls report showed only 22K jobs added, while unemployment rose to 4.3%. Jobless claims continue to climb, and prior payrolls were revised sharply lower. Consumer sentiment has weakened, with the University of Michigan survey dropping to a four-month low. Meanwhile, August CPI rose 2.9%, and core CPI held at 3.1%, although the Producer Price Index declined unexpectedly.

Consequently, this combination of soft labour figures and persistent inflation complicates the Fed’s policy path. With consumer weakness becoming more evident, the Fed may lean toward measures that protect employment. This potential shift could open the door to more rate cuts through year-end. At the same time, market participants are closely watching the Fed’s updated projections to determine the direction of future policy. However, continued policy easing into Q4 would likely add to gold’s bullish momentum.

Gold extends rally in broadening channel, eyes $4,000 level

The gold chart below shows a major breakout from a prolonged consolidation phase. For months, gold traded in a tight range below the key $3,500 pivot level. The price broke above this barrier in early September 2024 with strong momentum. This confirmed a breakout and reinforced the prevailing bullish trend.

Moreover, the chart reveals two distinct ascending channels that have guided recent price action. Initially, the earlier part of the rally developed within a smaller channel, which has now transitioned into a wider bullish formation. Subsequently, after forming a strong base between July and August, gold broke out decisively from its earlier narrow channel. Breaking above the $3,500 barrier, which had served as strong resistance, marked a decisive shift in market momentum. This breakout, in turn, set the stage for a more aggressive phase of the rally.

Currently, gold is advancing within a broader upward channel, with its upper boundary pointing toward the $4,000 zone. Price is approaching the midpoint of the wider channel, with bullish momentum still intact. Moreover, the absence of significant resistance levels leaves gold well-positioned for further upside. The rally may strengthen if the Fed signals more policy support. Additionally, the move is further backed by macroeconomic drivers, including weak jobs data, inflation concerns, and policy uncertainty.

Gold outlook: Momentum builds toward higher levels

Gold has hit record highs, driven by a powerful combination of macro and technical factors. The move beyond the $3,500 level stands out as a significant inflection point, supporting the potential for further gains. At the same time, weak labour data, sticky inflation, and growing political pressure continue to push the Federal Reserve toward further easing. Moreover, persistent confusion over the Fed’s path is adding to gold’s defensive appeal. With no significant resistance in sight and central bank decisions looming, gold looks set to extend its rally toward higher targets.

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