Gold (XAU/USD) spiked to $3,600.21 per ounce, securing its strongest weekly gain in nearly four months. The August U.S. nonfarm payrolls report showed just 22,000 jobs created versus 75,000 expected, while unemployment rose to 4.3%. That shock data sent Treasury yields tumbling, with the 10-year falling to 4.07% and the 2-year sliding to 3.50%, opening the door for a September Fed rate cut. Gold, which thrives in low-yield environments, reacted instantly, rallying over $30 in a matter of hours and pushing through its $3,585 resistance zone.
Fed Policy Shifts Fuel Gold Demand
Markets are now pricing a 90% chance of a 25-basis-point rate cut at the Fed’s September 17 meeting, with a 10% probability of a 50-basis-point move. Political interference is adding fuel, as President Trump continues his attacks on Fed Chair Jerome Powell and attempts to shake up the central bank. Goldman Sachs analysts warned that any loss of Fed independence could drive investors away from Treasuries and into gold, with their models pointing to prices as high as $5,000 per ounce if even 1% of the Treasury market rotated into bullion.
Central Banks and Asian Buyers in Focus
While futures markets pushed aggressively higher, physical demand in Asia has cooled. Buyers in India and China hesitated as gold crossed above $3,550, reflecting sticker shock at record levels. However, central banks remain active participants. China’s reserve update this week could provide clarity on whether official demand remains supportive. Globally, central banks accumulated more than 1,000 tonnes of gold in 2024, and expectations are for another year of heavy buying given ongoing currency and inflation risks.
Gold ETFs vs. Bitcoin ETFs – The Safe Haven Debate
The surge in gold comes as Bitcoin ETFs also draw record inflows, intensifying the narrative of “digital gold” challenging the traditional safe-haven. Spot Bitcoin ETFs now hold roughly $150 billion in assets under management, compared with $180 billion for gold ETFs, despite launching less than two years ago. That narrowing gap underscores the competition for capital between XAU/USD and BTC-USD. Analysts stress, however, that gold remains unmatched as a politically neutral and time-tested store of value, particularly when the Federal Reserve’s independence is in question.
Technical Landscape for XAU/USD
Technically, gold has broken its consolidation band between $3,500 and $3,560, with $3,600 now the key pivot. Sustained closes above $3,600 open the path to Fibonacci extensions at $3,680 and $3,755. On the downside, support lies at $3,520 and $3,455, with $3,400 serving as the line in the sand for bulls. Momentum indicators remain bullish, with RSI holding above 70 but not yet flashing overbought extremes. Traders are watching inflation data next week to test the durability of this breakout.
Macro Drivers Strengthening the Bullish Case
The weak labor market data comes on top of a deteriorating global growth outlook. Eurozone PMIs are soft, China’s property market slump persists, and U.S. GDP growth projections are being revised lower. These factors, alongside a weaker dollar — with DXY falling 0.48% to 97.76 this week — reinforce demand for gold. Stagflation fears are re-emerging, with Monex USA calling the setup “very serious stagflation,” a textbook environment where XAU/USD outperforms risk assets.
That’s TradingNEWS