Gold poised to test fresh highs

Gold held near historic levels on Monday, trading around 3,590 USD per ounce, bolstered by a softer-than-expected US labour market report for August. Employment growth fell short of forecasts, while the unemployment rate climbed to its highest level since 2021. This has reinforced market expectations of an imminent Federal Reserve rate cut as early as September, with investors pricing in a 92% probability of such a move.

Further supporting the bullish sentiment are growing doubts over the Fed’s independence, as former President Donald Trump continues to criticise the central bank – driving increased safe-haven demand for gold.

Demand was also reinforced by the People’s Bank of China, which added to its gold reserves for the tenth consecutive month in August as part of a broader strategy to diversify its holdings away from the US dollar.

Additionally, the metal gained support from trade policy developments, with the Trump administration exempting gold and certain other metals from its latest tariff list.

In summary, gold remains near all-time highs due to a combination of dovish Fed expectations, political uncertainty, and sustained central bank demand.

Technical analysis: XAU/USD

Four-hour chart

On the H4 chart, XAU/USD has completed another leg higher, reaching 3,600.07 USD. A corrective pullback toward the former resistance, which has now turned into support at around 3,550 USD, appears likely. Given the current fundamental backdrop, any test of this support may be followed by another upward wave, with initial targets at 3,600 USD and then 3,650 USD. The MACD indicator provides technical support for this scenario. Although the histogram and signal line remain above zero, both are declining – suggesting a near-term correction before the broader uptrend resumes.

One-hour chart

On the H1 chart, the pair tested 3,600.07 USD and is now forming a corrective decline. The initial support target is 3,550 USD. Holding this level could prompt renewed buying, supporting a continuation of the upward trend. The Stochastic oscillator aligns with this view, with its signal line testing the 50.0 level, indicating potential for further near-term consolidation or a mild retracement.

Conclusion

Gold remains well-supported by a confluence of fundamental factors, including expectations of Fed easing, geopolitical tensions, and robust institutional demand. While a short-term technical correction is likely, the broader bullish trend remains intact, with scope for further gains towards 3,650 USD.