Gold prices have climbed above $3,450, briefly reaching a two-month high, as traders anticipate upcoming U.S. employment data and monitor developments around the Federal Reserve’s independence. On a quiet Monday for U.S. markets due to the Labor Day holiday, XAU/USD is trading at $3,476, marking a 0.87% gain.
Gold approaches $3,500 amid weakening dollar and political tension
The recent rally in gold has been fueled by a combination of subdued U.S. Dollar performance and political uncertainty. Investor sentiment has turned cautious as concerns mount over the Federal Reserve’s autonomy, particularly following U.S. President Donald Trump’s push to remove Fed Governor Lisa Cook. Additionally, ongoing legal rulings over the legality of U.S. tariffs are keeping markets volatile, driving further interest in safe-haven assets like gold.
Traders are now closely watching the upcoming Nonfarm Payrolls (NFP) report, expected later this week, for further signals on labor market conditions and potential Fed policy direction.
Core inflation remains sticky, but rate cut odds stay high
Recent inflation figures indicate persistent price pressures. Core Personal Consumption Expenditures (PCE) rose 2.9% year-over-year in July, in line with forecasts but still well above the Fed’s 2% target. While this suggests inflation remains elevated, the market continues to price in a high probability of rate cuts due to signs of labor market softness.
According to Prime Market Terminal’s rate probability model, traders now see an 85% chance of a rate cut in September. Fed Chair Jerome Powell’s recent comments at Jackson Hole pointed to labor market vulnerabilities, shifting investor attention squarely onto employment data releases.
Daly joins dovish Fed voices as legal drama unfolds
San Francisco Fed President Mary Daly added to the dovish chorus over the weekend, stating that it may “soon be time to recalibrate policy to better match our economy.” She noted that while tariffs may cause a temporary inflation bump, deteriorating labor conditions warrant a more accommodative monetary stance.
Meanwhile, the court hearing over Trump’s effort to dismiss Governor Cook concluded Friday without a ruling. Judge Jia Cobb has requested further submissions from Cook’s legal team, with a decision now expected no earlier than Tuesday.
Market snapshot: Treasuries steady, Dollar under pressure
U.S. Treasury yields held steady, with the 10-year yield sitting at 4.232%. Real yields remain unchanged at 1.822%. The U.S. Dollar Index (DXY), which tracks the greenback against a basket of major currencies, edged lower by 0.14% to 97.71, extending its recent weakness.
Technical outlook: gold poised to test $3,500 resistance
XAU/USD’s uptrend regained momentum on Monday, pushing the metal to a session high of $3,489 before a modest pullback to $3,476. While the Relative Strength Index (RSI) is approaching overbought territory near 70, the strength of the current trend suggests that meaningful resistance may not appear until the RSI nears 80.
Should bullish momentum persist, gold could break through the $3,500 psychological barrier, with the next upside targets at $3,550 and $3,600. On the downside, immediate support lies at the June 16 high of $3,452. A breach below that level could see prices retreat toward $3,438 or even the $3,400 zone.
