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It is becoming almost inevitable that we mention new all-time highs on a daily basis for gold. Today it hit yet another high of $3871, before profit-taking caused it to turn lower on the session as London got underway. The recent sharp gains come despite the US dollar finding some support from stronger-than-expected US data last week, although some of that move has now reversed with the USD/JPY for example falling back in the last three sessions, ahead of more US data and a potential government shutdown. As far as gold is concerned, well it has for now decisively broken through the $3,800 threshold, before reversing a bit today. The key question is: can it hold at these highs, or will we see some more profit-taking ahead of key US jobs data this week?  Even if we get a slightly larger dip, the overall trend will stay bullish until the structure of higher highs and higher lows break. For now, the downside risks appear to be limited amid continued central bank buying, strong momentum and a weaker US dollar, all of which are helping to keep the sellers largely on the side-lines.
 

Fed rate cut expectations and impact on gold

The modest scaling back of bets on two additional Fed cuts this year has barely disrupted the bullish case for price of gold. The metal’s rally began well before the Fed tilted dovish, and its foundations lie in deeper structural drivers. Last week’s in-line PCE data proved a non-event, leaving gold supported by persistent central bank demand, concerns over the ballooning US debt load, and stubborn inflation. Speculative flows are amplifying the move. This week, however, could be pivotal. Should incoming data reduce the likelihood of a December rate cut, the dollar may gain firmer ground, potentially slowing gold’s climb. Conversely, if jobs numbers point to a weakening labour market, dollar softness should extend—favouring further strength in the gold outlook.
 

What is supporting the gold market?

Gold’s surge has been extraordinary, climbing more than 10% in September so far. At the heart of this rally is central bank demand. Geopolitical risks—from Europe and the Middle East to US–China frictions—are reinforcing gold’s role as a strategic hedge. Dollar weakness has provided another tailwind, with the Dollar Index recently breaking the summer lows of 96.37 (before bouncing back slightly). Fed rate cuts, along with the broader de-dollarisation trend, have eroded yields and increased gold’s appeal to non-dollar buyers. Political tensions between Washington and the Fed have only deepened doubts over policy independence, encouraging investors to seek gold as protection against policy missteps.
 

US labour market data in focus this week

Markets now turn to a heavy slate of US labour data this week: JOLTS, ADP payrolls, ISM surveys, and non-farm payrolls. With the dollar slipping in recent days, it may take another round of soft figures to keep the greenback under pressure. Stronger readings could trigger profit-taking in short-dollar positions, indirectly weighing on gold.

JOLTS (Tuesday) and NFP (Friday) will be the highlights, I think. Powell’s warning that there is no “risk-free path” on rates has left markets uncertain. A downside surprise in NFP could reinforce the case for easing and spark fresh gold gains.
 

Gold TA and levels to watch
 

(Click on image to enlarge)

Gold’s break above $3,800 this week marks another key psychological milestone. The next upside targets are $3,900 and possibly $4,000 in the weeks ahead. Support now sits at $3,790, $3,783, $3,760, and then $3,700. Resistance is less defined and unknown given we are trading at unchartered territories. Momentum indicators are extremely stretched, with RSI deeply overbought across time frames. But rather than flashing a sell signal, this underscores the strength of the prevailing trend. Unless a reversal pattern emerges, dip-buying remains the favoured strategy.

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