Gold Trading Alert: Gold prices have been on a roller coaster since hitting a record high. Has this peaked? Pay attention to US inflation data.
2025-09-10 07:45:38
Gold prices experienced a roller-coaster ride on Tuesday, fluctuating upwards to new all-time highs only to give up gains. During the Asia-Europe session, the price fluctuated between $3630 and $3660. During the New York session, the price briefly reached a new all-time high of $3674.36 per ounce, but subsequently fell back below $3630, ultimately closing at $3626.13 per ounce. In early Asian trading on Wednesday (September 10), the price of gold fluctuated upwards and is currently trading around $3636.88 per ounce.
Although the revised employment data released by the U.S. Department of Labor was worse than market expectations, gold bulls took the opportunity to take profits; the rebound of the U.S. dollar index from a seven-week low and the rebound of U.S. Treasury yields from a nearly five-month low also made gold bulls cautious. In addition, U.S. stocks continued to hit new historical highs, which also slightly weakened the safe-haven demand for gold.
Currently, investors are generally focused on the US inflation data to be released this week, and market wait-and-see sentiment is growing.
Since September, the price of gold has risen by 5.5%, a cumulative increase of nearly $200, breaking multiple historical highs. The core driving force behind the rise in gold prices to historical highs this time comes from the market's strong expectations for the pace of the Fed's interest rate cuts.
Bart Melek, head of commodity strategy at TD Securities, put it bluntly: "This rally is being driven primarily by market expectations that the Fed may begin cutting interest rates in September."
According to real-time data from CME's FedWatch tool, traders currently expect the probability of the Federal Reserve cutting interest rates by at least 25 basis points at next week's meeting to be 100%, and some aggressive investors are even betting that the rate cut may be as high as 50 basis points.
This almost certain expectation has greatly increased the attractiveness of gold as an interest-free asset - falling interest rates tend to put pressure on the US dollar and bond yields, thereby driving funds into the gold market.
At the same time, weak data on the U.S. labor market also provided additional support for gold prices. The latest revised data showed that U.S. job growth between April 2024 and March 2025 was nearly 1 million lower than the initial estimate, which was even larger than the downward revision during the 2008 financial crisis.
Michael Ashley Schulman, chief investment officer at Running Point, put it eloquently: "The revision of employment data has turned the employment story from a fairy tale into an audit record." This obvious cooling of the labor market further strengthens the logic that the Federal Reserve needs to take interest rate cuts to support the economy.
However, gold prices haven't been able to hold onto all their gains since hitting a record high. With the US dollar index rebounding from a seven-week low of 97.24 to 97.76, and US Treasury yields rising from near five-month lows, gold bulls are starting to look hesitant. The dollar's slight rebound has made dollar-denominated gold more expensive for holders of other currencies, dampening some demand.
More notably, the continued strength of the U.S. stock market has also diverted funds from the gold market to a certain extent. The S&P 500 and Nasdaq indices hit record closing highs again on Tuesday, reflecting a significant rebound in market risk appetite.
When investors are able to get decent returns from the stock market, gold's safe-haven appeal will naturally be weakened.
In addition, some traders chose to take profits after the gold price hit a record high, which was also a technical factor leading to the late-session decline.
The market is currently focused on upcoming US inflation data. The Producer Price Index (PPI) will be released on Wednesday, while the more crucial Consumer Price Index (CPI) is scheduled for release on Thursday. These figures will be crucial for determining the direction of Federal Reserve policy, especially given the widespread market expectation of an interest rate cut.
On the one hand, if inflation data remains moderate or even shows signs of declining, it will strengthen the rationale for the Fed's interest rate cuts and provide a new round of upward momentum for gold prices. As Melek said: "If the US economy performs poorly, it may prompt capital to flow into unconventional assets such as gold."
On the other hand, if the inflation data is unexpectedly strong, it may force the market to reassess the extent and pace of interest rate cuts, and even shake the certainty of the September rate cut expectations, thereby putting pressure on gold prices.
This uncertainty is also reflected in the inherent tension in the Federal Reserve's policy objectives. Elias Haddad, a strategist at Brown Brothers Harriman, noted that the Fed's recent dovish shift "will lead the dollar to a new cyclical low," as the central bank now appears to prioritize full employment over price stability. This shift in policy focus may be bullish for gold in the long term, but it could also create short-term volatility due to fluctuating data and adjustments in market expectations.
Despite short-term fluctuations, the structural factors supporting the long-term bull market in gold remain solid.
John Ciampaglia, CEO of Sprott Asset Management, emphasized: "Even though the gold price has reached $3,600, we remain bullish - we believe the market still has room to rise." This judgment is based on multiple dimensions: the continued demand for gold purchases by central banks around the world provides a stable buying basis for the market; the intensification of global geopolitical uncertainty has enhanced gold's safe-haven properties; and the loose monetary policy environment has fundamentally reduced the opportunity cost of holding gold.
Furthermore, trade tensions stemming from the Trump administration's tariff policies and concerns about slowing global economic growth are further strengthening gold's position as a store of value. Ciampaglia added, "We don't see any material shifts in tariff policies, trade relations, or geopolitics." This means the core drivers of gold prices are unlikely to disappear in the short term.
The gold market is caught in a delicate balancing act: on the one hand, eager anticipation for a Federal Reserve rate cut and concerns about global economic uncertainty; on the other, the risk of a dollar rebound and market profit-taking pressure. This intense clash of forces is likely to keep gold prices volatile at high levels for some time to come.
However, from a broader perspective, gold's long-term outlook remains supported by deeper factors such as shifting global monetary policy, rising geopolitical risks, and a growing demand for asset diversification. As the market awaits new directional guidance from inflation data, investors should closely monitor any subtle shifts in the Fed's policy signals. A breakout from its all-time high may be just the beginning of a new chapter for gold, not the end.
At 07:41 Beijing time, spot gold was trading at $3636.74 per ounce.
Although the revised employment data released by the U.S. Department of Labor was worse than market expectations, gold bulls took the opportunity to take profits; the rebound of the U.S. dollar index from a seven-week low and the rebound of U.S. Treasury yields from a nearly five-month low also made gold bulls cautious. In addition, U.S. stocks continued to hit new historical highs, which also slightly weakened the safe-haven demand for gold.
Currently, investors are generally focused on the US inflation data to be released this week, and market wait-and-see sentiment is growing.
1. The driving force behind the historical high: interest rate cut expectations and weak data
Since September, the price of gold has risen by 5.5%, a cumulative increase of nearly $200, breaking multiple historical highs. The core driving force behind the rise in gold prices to historical highs this time comes from the market's strong expectations for the pace of the Fed's interest rate cuts.
Bart Melek, head of commodity strategy at TD Securities, put it bluntly: "This rally is being driven primarily by market expectations that the Fed may begin cutting interest rates in September."
According to real-time data from CME's FedWatch tool, traders currently expect the probability of the Federal Reserve cutting interest rates by at least 25 basis points at next week's meeting to be 100%, and some aggressive investors are even betting that the rate cut may be as high as 50 basis points.
This almost certain expectation has greatly increased the attractiveness of gold as an interest-free asset - falling interest rates tend to put pressure on the US dollar and bond yields, thereby driving funds into the gold market.
At the same time, weak data on the U.S. labor market also provided additional support for gold prices. The latest revised data showed that U.S. job growth between April 2024 and March 2025 was nearly 1 million lower than the initial estimate, which was even larger than the downward revision during the 2008 financial crisis.
Michael Ashley Schulman, chief investment officer at Running Point, put it eloquently: "The revision of employment data has turned the employment story from a fairy tale into an audit record." This obvious cooling of the labor market further strengthens the logic that the Federal Reserve needs to take interest rate cuts to support the economy.
2. Profit-taking and rising risk appetite: the dual pressures of gold prices falling
However, gold prices haven't been able to hold onto all their gains since hitting a record high. With the US dollar index rebounding from a seven-week low of 97.24 to 97.76, and US Treasury yields rising from near five-month lows, gold bulls are starting to look hesitant. The dollar's slight rebound has made dollar-denominated gold more expensive for holders of other currencies, dampening some demand.
More notably, the continued strength of the U.S. stock market has also diverted funds from the gold market to a certain extent. The S&P 500 and Nasdaq indices hit record closing highs again on Tuesday, reflecting a significant rebound in market risk appetite.
When investors are able to get decent returns from the stock market, gold's safe-haven appeal will naturally be weakened.
In addition, some traders chose to take profits after the gold price hit a record high, which was also a technical factor leading to the late-session decline.
3. Inflation data and policy game: the market faces a critical test period
The market is currently focused on upcoming US inflation data. The Producer Price Index (PPI) will be released on Wednesday, while the more crucial Consumer Price Index (CPI) is scheduled for release on Thursday. These figures will be crucial for determining the direction of Federal Reserve policy, especially given the widespread market expectation of an interest rate cut.
On the one hand, if inflation data remains moderate or even shows signs of declining, it will strengthen the rationale for the Fed's interest rate cuts and provide a new round of upward momentum for gold prices. As Melek said: "If the US economy performs poorly, it may prompt capital to flow into unconventional assets such as gold."
On the other hand, if the inflation data is unexpectedly strong, it may force the market to reassess the extent and pace of interest rate cuts, and even shake the certainty of the September rate cut expectations, thereby putting pressure on gold prices.
This uncertainty is also reflected in the inherent tension in the Federal Reserve's policy objectives. Elias Haddad, a strategist at Brown Brothers Harriman, noted that the Fed's recent dovish shift "will lead the dollar to a new cyclical low," as the central bank now appears to prioritize full employment over price stability. This shift in policy focus may be bullish for gold in the long term, but it could also create short-term volatility due to fluctuating data and adjustments in market expectations.
4. Structural support remains solid: the long-term bull market logic for gold remains unchanged
Despite short-term fluctuations, the structural factors supporting the long-term bull market in gold remain solid.
John Ciampaglia, CEO of Sprott Asset Management, emphasized: "Even though the gold price has reached $3,600, we remain bullish - we believe the market still has room to rise." This judgment is based on multiple dimensions: the continued demand for gold purchases by central banks around the world provides a stable buying basis for the market; the intensification of global geopolitical uncertainty has enhanced gold's safe-haven properties; and the loose monetary policy environment has fundamentally reduced the opportunity cost of holding gold.
Furthermore, trade tensions stemming from the Trump administration's tariff policies and concerns about slowing global economic growth are further strengthening gold's position as a store of value. Ciampaglia added, "We don't see any material shifts in tariff policies, trade relations, or geopolitics." This means the core drivers of gold prices are unlikely to disappear in the short term.
Summary: Gold ushers in a new era amidst volatility
The gold market is caught in a delicate balancing act: on the one hand, eager anticipation for a Federal Reserve rate cut and concerns about global economic uncertainty; on the other, the risk of a dollar rebound and market profit-taking pressure. This intense clash of forces is likely to keep gold prices volatile at high levels for some time to come.
However, from a broader perspective, gold's long-term outlook remains supported by deeper factors such as shifting global monetary policy, rising geopolitical risks, and a growing demand for asset diversification. As the market awaits new directional guidance from inflation data, investors should closely monitor any subtle shifts in the Fed's policy signals. A breakout from its all-time high may be just the beginning of a new chapter for gold, not the end.
At 07:41 Beijing time, spot gold was trading at $3636.74 per ounce.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
