Gold has maintained strong bullish momentum, gaining over 4.5% in the past five trading sessions. Confidence in the metal as a safe-haven asset continues to support buying interest amid US labor market data that has reinforced rate cut expectations. As long as this outlook persists, gold remains more attractive relative to US Treasuries and may amplify upward pressure in the near term.
How Much Will the Fed Cut Rates?
The latest labor data showed deterioration greater than expected. In August, only 22,000 new jobs were reported, well below the anticipated 75,000. Additionally, June figures were revised down by 13,000 jobs after adjustments, confirming the first negative growth since 2020. This reflects that persistently high interest rates have already negatively impacted the labor market, further weakening the US economy.
This situation makes a rate-cutting cycle nearly inevitable. According to CME data, the probability of a 0.25% rate cut in September stands at 88.2%, with October at 73.9% and December at 69.3%. If realized, the current 4.5% rate could fall to 3.75% by the end of 2025, solidifying the Federal Reserve's more dovish stance.
The rate cut outlook has also pressured 10-year US Treasury yields, which dropped from 4.2% to 4.0% in just a few trading sessions. Compared to gold, US Treasuries have lost appeal due to declining returns, encouraging capital to shift from bonds to the metal. This reinforces gold's position as the preferred safe-haven asset and may sustain strong demand in the short term.
US Treasuries have traditionally been gold's primary competitor as a safe-haven asset. However, as yields decline, investors find them less attractive, leading to continued capital flows toward gold. This movement boosts demand for the metal and solidifies its position as the most stable safe-haven asset during periods of economic uncertainty.
If the prospect of declining interest rates continues and bond yields remain weak, gold may continue attracting significant capital inflows, maintaining sustained buying pressure on gold/USD in the coming trading sessions.
Gold Technical Outlook
• Bullish Momentum Continues: Since August 20, gold/USD has continuously set new record highs, confirming that bullish sentiment dominates the charts. This trend is sufficient to keep gold in an aggressive buying cycle, though this strength may begin showing signs of fatigue. If prices stabilize at higher levels, technical corrections may emerge as the market consolidates gains before attempting to extend the trend further.
• RSI: The RSI line shows a clear upward slope, already above the neutral zone and reaching overbought territory near 70. This reflects excessive buying pressure in recent trading sessions, suggesting the market may be in an imbalanced state. If the RSI remains in this area, there's risk of short-term correction against this excessive rally.
• MACD: Both the line and histogram remain firmly above the zero axis, confirming short-term moving averages are still in bullish territory. This supports continuation of the upward trend, though the possibility of short-term adjustment remains after such a strong move.
Key Levels to Watch:
• $3,700 – Tentative Resistance: A key psychological level and round number reference. With no historical levels for reference, this becomes the first obstacle bulls must overcome. A clean break above this level would open the path for a more aggressive bullish trend.
• $3,500 – Recent Support: Formed after the latest minor correction, this is the first line of defense against potential pullbacks. Staying above this area keeps the bullish structure intact, while a break below could trigger a larger correction.
• $3,400 – Critical Support: This level was previously the upper bound of a sideways channel that dominated for months and is now the most important level to watch. A decline to this area would put the aggressive bullish trend at risk of collapse and could signal a shift in technical structure.