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Gold rises above $3,450 and may challenge the $3,500 record on Monday, as US markets are quiet for Labor Day. Concerns regarding the Federal Reserve’s (Fed) independence and ongoing uncertainty about the trade war have kept the US Dollar subdued and increased flows toward the precious metals sector. At the time of writing, the XAU/USD trades at $3,476, up by over 0.87%.

Bullion rallies toward $3,500 record high amid subdued US Dollar

Last week, inflation data showed prices were nearly 3% higher on an annual basis, above the Fed's 2% target. Fed Chair Jerome Powell highlighted labor market weaknesses at Jackson Hole, making jobs data the focus, while traders overlooked the core PCE Price Index release.

The core PCE rose 2.9% YoY in July as expected, showing that the disinflation process is far from resuming. Despite inflation remaining above target, the expectations for a rate cut persist due to labor market weakness. The chances of a Fed September rate cut remain high with odds standing at 85%, according to Prime Market Terminal interest rate probabilities tool.

In the meantime, Gold traders are laser focused on the release of Nonfarm Payrolls (NFP) figures and further developments in the firing of Fed Governor Lisa Cook by US President Donald Trump.

XAU/USD has extended its gains as market participants believe that the White House’s response could undermine the Fed’s independence, leading to concerns about monetary policy stability. Also, the decision of the US Court of Appeals of ruling most tariffs illegally would keep uncertainty in the markets and boost Bullion’s appeal.

Daily digest market movers: Gold resumes uptrend ahead of busy US economic docket

• US Treasury yields are flat, with the 10-year Treasury note sitting at 4.232%. US real yields — which are calculated from the nominal yield minus inflation expectations — are unchanged at 1.822% at the time of writing.
• The US Dollar Index (DXY), which tracks the performance of the US Dollar against a basket of six currencies, is down 0.14% to 97.71.
• The court hearing for Trump’s attempt to remove Fed Governor Lisa Cook ended on Friday with no decision. Judge Jia Cobb has asked Cook's legal team to submit further briefs, pushing the earliest possible decision to Tuesday.
• Over the weekend, San Francisco Fed President Mary Daly wrote that it will “soon be time to recalibrate policy to better match our economy,” adding her name to the dove chorus led by Fed Governors Waller and Bowman. She added that tariffs would trigger a “one-off” inflation uptick, and that signs of labor market weakness warrant easing policy

Technical outlook: Gold price poised to challenge $3,500 in the near term

Gold’s uptrend resumed on Monday as the yellow metal hit a two-month high of $3,489, before retreating toward $3,476. Although the Relative Strength Index (RSI) is nearing the 70 threshold, current trend strength suggests that the most significant overbought conditions are expected closer to the 80 level.  

Given current conditions, Gold may rise above $3,500 if buying momentum continues. Once surpassed, the next resistance levels are at $3,550 and $3,600. Conversely, if XAU/USD falls below the June 16 high of $3,452, now acting as support, it could move toward the July 23 high of $3,438. Additional declines may bring the price to $3,400.

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