Gold trading reminder: The Federal Reserve’s “interest rate cut gift” is about to trigger a super week, will the gold price go straight to $4,000?
2025-09-15 07:50:27
Spot gold prices saw a slight decline in early Asian trading on Monday (September 15th), currently trading around $3,637 per ounce. Last Friday, the international gold price rose only 0.26%, closing at $3,643.21 per ounce, but this figure is just shy of the peak of $3,674 reached earlier in the week. The driving force behind this is the weakening US labor market, which has reinforced expectations that the Federal Reserve will deliver its first interest rate cut of the year this week. A survey shows that most analysts remain bullish on the gold market, with some predicting a price above $3,900.
Kitco News' weekly gold survey shows that among the 15 Wall Street analysts, 80% (or 12 people) are firmly optimistic about price increases in the coming week, only 13% (2 people) predict a decline, and the remaining 7% (1 person) expects sideways trading.
This week, not only will the Federal Reserve make its interest rate decision, but also the US retail sales data, known as the "horror data", will be released. The Bank of Canada, the Bank of England and the Bank of Japan will also announce their interest rate decisions respectively. A new round of trade negotiations between China and the United States is also underway, so investors need to pay close attention.
The pulse of the US economy was hammered last week by a surge in initial unemployment claims. According to the latest data, this indicator saw its largest weekly increase in four years, mirroring the weak non-farm payroll report, which showed a downward revision of 911,000 jobs in the 12 months ending in March. These figures, like a hammer, shattered market illusions of economic resilience and suggested a quiet cooling of US economic momentum. The surge in unemployment claims not only reflects a weakening hiring appetite among businesses but also exposes structural cracks in the labor market—the specter of job losses is spreading from manufacturing to the service sector.
Against this backdrop, the Fed's monetary policy tilt is inevitable. Investors are no longer preoccupied with short-term fluctuations, but are focused on the wait-and-see atmosphere leading up to this week's Fed decision. After all, since the Fed's last rate cut in December of last year, its benchmark interest rate has remained on hold at 4.25%-4.5% for nine months. But now, a weakening labor market has become the final straw that breaks the camel's back, reinforcing the market's desire for looser policies. The slight rise in gold prices isn't an isolated incident, but rather the direct product of this chain of expectations: when economic downside risks intensify, gold's safe-haven properties as a "hard currency" instantly activate, triggering a flood of capital inflows and stabilizing prices at high levels.
Of course, inflation data isn't entirely uneventful. Last Thursday's Consumer Price Index (CPI) report showed that US consumer prices rose by the largest month-over-month increase in seven months in August, raising market concerns about rising prices. In stark contrast, last Wednesday's Producer Price Index (PPI) unexpectedly declined, indicating that the overall inflation path remains moderate, broadly in line with economists' expectations. However, when forming interest rate expectations, investors appear to be selectively blind, prioritizing labor market slack over inflationary stickiness. This isn't blind optimism, but rather a deep understanding of the Federal Reserve's decision-making logic: Chairman Powell and his team have repeatedly emphasized that employment stability is a core pillar of monetary policy. Once this red line is crossed, the floodgates for rate cuts will open quickly.
This market consensus prioritizing employment has further bolstered gold prices. While inflation is picking up, its modest level isn't enough to reverse expectations of easing. Furthermore, the University of Michigan's preliminary consumer confidence index unexpectedly fell to 55.4 last Friday, its lowest level since May, significantly below August's 58.2 and economists' expectations of 58.0. This data serves as a mirror, reflecting consumers' pessimism about the future: from spending intentions to job prospects, declining confidence is quietly eroding economic vitality. In this environment, gold prices have naturally become a safe haven for investors, and the inverse correlation between its price and employment data has become a well-established principle among Wall Street traders.
Turning to market expectations, federal funds rate futures have fully digested the probability of a 25 basis point rate cut at the September 17 meeting, reaching nearly 100%, and even 4% of bets are pointing to a more radical 50 basis point cut.
According to CME's FedWatch tool, this pricing path suggests that the easing will be relatively mild this year, but it is enough to ignite the enthusiasm of gold prices. Data from the London Stock Exchange Group (LSEG) also supports this consensus: traders are looking forward to Wednesday's decision and have already regarded the Fed's "dovish signal" as a foregone conclusion.
Institutional voices are adding fuel to the fire. UBS analyst Giovanni Staunovo bluntly stated in his latest report: "Taking into account these positive factors and the recent significant increase in ETF inflows, we now expect gold to rise to $3,900 per ounce by the middle of next year."
This prediction is not groundless, but is based on multiple cumulative effects: the start of a cycle of interest rate cuts will lower real interest rates and weaken the appeal of the US dollar. Simultaneously, rising geopolitical uncertainty (as discussed below) will further enhance gold's value preservation function. With a 39% year-to-date gain, gold has transformed from a "Sleeping Beauty" at the beginning of the year into a market darling, and the continued inflow of ETF funds has fueled this surge.
The market is holding its breath as the Fed statement, summary of economic projections and Powell's speech are about to be released - any hint of dovishness could push gold prices to new highs.
Last Friday, U.S. Treasury yields rose amid subdued trading. The 10-year yield rebounded from a five-month low of 3.994% hit last Thursday to 4.06%, a gain of about 1.12%, approaching its largest increase in a month. Although yields dipped briefly after the release of the University of Michigan report, the lingering 4% level is largely seen as a rebound from an excessive decline earlier in the week. Molly Brooks, an interest rate strategist at TD Securities in New York, put it bluntly: "Today's move may simply be a correction of an earlier overreaction." On the eve of the Federal Reserve meeting, Tuesday's August retail sales report will be the only key indicator, directly addressing the heart of the economy, consumer demand, and further influencing the yield curve.
Meanwhile, the US dollar index edged up 0.08% to 97.60 on Friday, but remained near a one-and-a-half-month low, posting a weekly loss of 0.12%. John Velis, Americas macro strategist at BNY, attributed the gain to "pre-weekend positioning." However, the broader outlook for the dollar remains bleak: the impending Federal Reserve rate cut and continued hedging of US assets by foreign investors will continue to weigh on the dollar. The continued decline in consumer confidence has further dented the dollar's performance.
Tom Simons, Jefferies' chief U.S. economist, expressed optimism that if the Federal Reserve cuts interest rates as expected and hints at further easing, businesses may seize the opportunity to revive hiring and recoup profits lost to tariffs. However, in the short term, the dollar's weakness is undoubtedly a godsend for gold—as a contrarian indicator, a weaker dollar often goes hand in hand with stronger gold prices.
Beyond the macro picture, geopolitical undercurrents are quietly surging, further gilding gold's "fuse" aura. On September 14th, US President Trump reiterated his intention to impose sanctions on Russia and urged Europe to follow suit – a statement that undoubtedly exacerbated transatlantic divisions given Europe's significant oil imports from Russia. Meanwhile, Ukrainian Unmanned Systems Commander Robert Brovdi announced that his drone unit and special operations forces had carried out a strike on the Kirish refinery in Leningrad Oblast, Russia. Russian Governor Drozdenko quickly confirmed that air defense systems had shot down four drones, but the wreckage caused a fire that affected the refinery, one of the five largest oil refineries with an annual output of 20 million tons, primarily producing high-octane gasoline and fuel.
Potential disruptions at the Kirish refinery not only threaten Russia's fuel supply chain but could also push up global oil prices, amplifying inflation concerns. While the Federal Reserve is weighing the impact of tariffs, which will take time to become apparent, the escalating conflict between Russia and Ukraine is pushing geopolitical risks to new heights.
FHN Financial macro strategist Will Compernolle warned in a client report last Friday: "The tone of the Fed's guidance is highly uncertain, and yield trends will be weak in the coming days and prone to reversal after Wednesday's decision." Gold stands out amid such uncertainty - its safe-haven attribute is no longer an abstract concept, but a real "firewall" that attracts global funds for risk aversion.
In summary, gold's record high is not a flash in the pan; it's the product of a confluence of favorable factors: expectations of interest rate cuts fueled by a sluggish labor force, modest inflationary concessions, resolute market bets, and the catalyst of geopolitical turmoil. This week's Federal Reserve meeting will be a key turning point. If Powell delivers more dovish signals, gold prices could easily break through $3,700, reaching UBS's medium-term target of $3,900. If the Fed unexpectedly adopts a hawkish rate cut, gold prices could experience a significant correction.
(Spot gold daily chart, source: Yihuitong)
At 07:48 Beijing time, spot gold was trading at $3637.60 per ounce.
Kitco News' weekly gold survey shows that among the 15 Wall Street analysts, 80% (or 12 people) are firmly optimistic about price increases in the coming week, only 13% (2 people) predict a decline, and the remaining 7% (1 person) expects sideways trading.
This week, not only will the Federal Reserve make its interest rate decision, but also the US retail sales data, known as the "horror data", will be released. The Bank of Canada, the Bank of England and the Bank of Japan will also announce their interest rate decisions respectively. A new round of trade negotiations between China and the United States is also underway, so investors need to pay close attention.
Weak labor market: Alarm bells of economic cooling sound the prelude to rising gold prices
The pulse of the US economy was hammered last week by a surge in initial unemployment claims. According to the latest data, this indicator saw its largest weekly increase in four years, mirroring the weak non-farm payroll report, which showed a downward revision of 911,000 jobs in the 12 months ending in March. These figures, like a hammer, shattered market illusions of economic resilience and suggested a quiet cooling of US economic momentum. The surge in unemployment claims not only reflects a weakening hiring appetite among businesses but also exposes structural cracks in the labor market—the specter of job losses is spreading from manufacturing to the service sector.
Against this backdrop, the Fed's monetary policy tilt is inevitable. Investors are no longer preoccupied with short-term fluctuations, but are focused on the wait-and-see atmosphere leading up to this week's Fed decision. After all, since the Fed's last rate cut in December of last year, its benchmark interest rate has remained on hold at 4.25%-4.5% for nine months. But now, a weakening labor market has become the final straw that breaks the camel's back, reinforcing the market's desire for looser policies. The slight rise in gold prices isn't an isolated incident, but rather the direct product of this chain of expectations: when economic downside risks intensify, gold's safe-haven properties as a "hard currency" instantly activate, triggering a flood of capital inflows and stabilizing prices at high levels.
Inflation stickiness vs. employment priority: Why do investors prefer labor signals?
Of course, inflation data isn't entirely uneventful. Last Thursday's Consumer Price Index (CPI) report showed that US consumer prices rose by the largest month-over-month increase in seven months in August, raising market concerns about rising prices. In stark contrast, last Wednesday's Producer Price Index (PPI) unexpectedly declined, indicating that the overall inflation path remains moderate, broadly in line with economists' expectations. However, when forming interest rate expectations, investors appear to be selectively blind, prioritizing labor market slack over inflationary stickiness. This isn't blind optimism, but rather a deep understanding of the Federal Reserve's decision-making logic: Chairman Powell and his team have repeatedly emphasized that employment stability is a core pillar of monetary policy. Once this red line is crossed, the floodgates for rate cuts will open quickly.
This market consensus prioritizing employment has further bolstered gold prices. While inflation is picking up, its modest level isn't enough to reverse expectations of easing. Furthermore, the University of Michigan's preliminary consumer confidence index unexpectedly fell to 55.4 last Friday, its lowest level since May, significantly below August's 58.2 and economists' expectations of 58.0. This data serves as a mirror, reflecting consumers' pessimism about the future: from spending intentions to job prospects, declining confidence is quietly eroding economic vitality. In this environment, gold prices have naturally become a safe haven for investors, and the inverse correlation between its price and employment data has become a well-established principle among Wall Street traders.
Futures market bets and institutional forecasts: Gold's "$3,900 dream" is getting closer
Turning to market expectations, federal funds rate futures have fully digested the probability of a 25 basis point rate cut at the September 17 meeting, reaching nearly 100%, and even 4% of bets are pointing to a more radical 50 basis point cut.
According to CME's FedWatch tool, this pricing path suggests that the easing will be relatively mild this year, but it is enough to ignite the enthusiasm of gold prices. Data from the London Stock Exchange Group (LSEG) also supports this consensus: traders are looking forward to Wednesday's decision and have already regarded the Fed's "dovish signal" as a foregone conclusion.
Institutional voices are adding fuel to the fire. UBS analyst Giovanni Staunovo bluntly stated in his latest report: "Taking into account these positive factors and the recent significant increase in ETF inflows, we now expect gold to rise to $3,900 per ounce by the middle of next year."
This prediction is not groundless, but is based on multiple cumulative effects: the start of a cycle of interest rate cuts will lower real interest rates and weaken the appeal of the US dollar. Simultaneously, rising geopolitical uncertainty (as discussed below) will further enhance gold's value preservation function. With a 39% year-to-date gain, gold has transformed from a "Sleeping Beauty" at the beginning of the year into a market darling, and the continued inflow of ETF funds has fueled this surge.
The market is holding its breath as the Fed statement, summary of economic projections and Powell's speech are about to be released - any hint of dovishness could push gold prices to new highs.
Treasury bonds and the US dollar are linked: the macro environment paves a "golden road" for gold
Last Friday, U.S. Treasury yields rose amid subdued trading. The 10-year yield rebounded from a five-month low of 3.994% hit last Thursday to 4.06%, a gain of about 1.12%, approaching its largest increase in a month. Although yields dipped briefly after the release of the University of Michigan report, the lingering 4% level is largely seen as a rebound from an excessive decline earlier in the week. Molly Brooks, an interest rate strategist at TD Securities in New York, put it bluntly: "Today's move may simply be a correction of an earlier overreaction." On the eve of the Federal Reserve meeting, Tuesday's August retail sales report will be the only key indicator, directly addressing the heart of the economy, consumer demand, and further influencing the yield curve.
Meanwhile, the US dollar index edged up 0.08% to 97.60 on Friday, but remained near a one-and-a-half-month low, posting a weekly loss of 0.12%. John Velis, Americas macro strategist at BNY, attributed the gain to "pre-weekend positioning." However, the broader outlook for the dollar remains bleak: the impending Federal Reserve rate cut and continued hedging of US assets by foreign investors will continue to weigh on the dollar. The continued decline in consumer confidence has further dented the dollar's performance.
Tom Simons, Jefferies' chief U.S. economist, expressed optimism that if the Federal Reserve cuts interest rates as expected and hints at further easing, businesses may seize the opportunity to revive hiring and recoup profits lost to tariffs. However, in the short term, the dollar's weakness is undoubtedly a godsend for gold—as a contrarian indicator, a weaker dollar often goes hand in hand with stronger gold prices.
Geopolitical storm: Russia-Ukraine conflict escalates, gold's safe-haven appeal becomes stronger
Beyond the macro picture, geopolitical undercurrents are quietly surging, further gilding gold's "fuse" aura. On September 14th, US President Trump reiterated his intention to impose sanctions on Russia and urged Europe to follow suit – a statement that undoubtedly exacerbated transatlantic divisions given Europe's significant oil imports from Russia. Meanwhile, Ukrainian Unmanned Systems Commander Robert Brovdi announced that his drone unit and special operations forces had carried out a strike on the Kirish refinery in Leningrad Oblast, Russia. Russian Governor Drozdenko quickly confirmed that air defense systems had shot down four drones, but the wreckage caused a fire that affected the refinery, one of the five largest oil refineries with an annual output of 20 million tons, primarily producing high-octane gasoline and fuel.
Potential disruptions at the Kirish refinery not only threaten Russia's fuel supply chain but could also push up global oil prices, amplifying inflation concerns. While the Federal Reserve is weighing the impact of tariffs, which will take time to become apparent, the escalating conflict between Russia and Ukraine is pushing geopolitical risks to new heights.
FHN Financial macro strategist Will Compernolle warned in a client report last Friday: "The tone of the Fed's guidance is highly uncertain, and yield trends will be weak in the coming days and prone to reversal after Wednesday's decision." Gold stands out amid such uncertainty - its safe-haven attribute is no longer an abstract concept, but a real "firewall" that attracts global funds for risk aversion.
Summarize
In summary, gold's record high is not a flash in the pan; it's the product of a confluence of favorable factors: expectations of interest rate cuts fueled by a sluggish labor force, modest inflationary concessions, resolute market bets, and the catalyst of geopolitical turmoil. This week's Federal Reserve meeting will be a key turning point. If Powell delivers more dovish signals, gold prices could easily break through $3,700, reaching UBS's medium-term target of $3,900. If the Fed unexpectedly adopts a hawkish rate cut, gold prices could experience a significant correction.
(Spot gold daily chart, source: Yihuitong)
At 07:48 Beijing time, spot gold was trading at $3637.60 per ounce.
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