Gold Trading Alert: Gold prices soar! The Fed is signaling a market rescue. Is the 3,700 mark the next stop?
2025-09-16 06:50:48
On Monday (September 15), spot gold prices closed strongly at $3,678.73 per ounce, up approximately 1%, and briefly hit a record high of $3,685.47 during the session. This wasn't just a simple price fluctuation, but rather a "gold storm" fueled by a combination of factors. A weak US dollar index, declining US Treasury yields, and eager anticipation for the Federal Reserve's policy meeting this week all contributed to gold's upward momentum. With the Fed's two-day meeting set to begin on Tuesday, and widespread market expectations suggesting it will be the first interest rate cut since December, gold's rally appears to have only just begun. In early Asian trading on Tuesday (September 16), spot gold prices fluctuated within a narrow range, currently trading at $3,677.81 per ounce.
The surge in gold prices was primarily due to the obvious weakness of the US dollar and the simultaneous decline in US Treasury yields.
On Monday, the US dollar index fell 0.3%, hitting a near one-week low of 97.26 before closing at 97.33. This decline makes gold more attractive to investors holding other currencies, as the depreciation of the US dollar directly reduces the relative cost of holding gold. Imagine, when the US dollar slides like a deflated ball, global capital naturally flows into "hard currencies" like gold, seeking to preserve and increase its value.
Meanwhile, signals from the U.S. Treasury market are also bullish for gold. The 10-year Treasury yield fell 2.6 basis points to 4.034%, marking its third consecutive day of decline. The 30-year Treasury yield also fell 2.6 basis points to 4.653%. This downward-sloping yield curve stems from a series of recent economic data that have signaled a weakening labor market. For example, the New York Fed's manufacturing index unexpectedly came in at -8.7, the first time it has fallen into negative territory since June and well below economists' expectations of a positive 5.0. This data served as a wake-up call, rekindling market concerns about slowing economic growth and further reinforcing the urgency of a Federal Reserve interest rate cut.
In this environment, Certuity Chief Investment Officer Scott Welch's perspective is quite representative, noting that investors are adjusting their positions by "buying on the news and selling after the facts are confirmed." If the expected Fed rate cut materializes, barring unexpected hawkish signals, long-term bond yields may not continue to fall significantly, but inflation concerns may drive them up slightly in the short term. This provides valuable breathing space for gold—falling yields reduce the opportunity cost of holding non-interest-bearing assets like gold, naturally attracting an influx of funds.
This week's Federal Reserve meeting is undoubtedly the focus of global financial markets. The policy review, which begins on Tuesday and is expected to be announced on Wednesday, will directly set the tone for the pace of monetary easing for the rest of the year.
According to CME's FedWatch tool, the market has almost fully priced in a 25 basis point rate cut, with a 96% probability, while the probability of a more aggressive 50 basis point cut is only 4-5%.
Peter Grant, vice president and senior metals strategist at Zaner Metals, said frankly that this expectation has been basically digested, but there may be "one or two" additional interest rate cuts before the end of the year, which provides solid support for the long-term upward trend of gold.
The meeting was particularly significant due to intensified external pressure. US President Trump again called on Federal Reserve Chairman Jerome Powell on Monday to cut interest rates "even more aggressively," even citing the weakness in the real estate market as pressure for accelerated policy easing.
Meanwhile, the Senate will vote on Wednesday to confirm Trump's economic adviser, Milan, to join the interest rate-setting committee, which could further amplify the influence of political factors on the Fed's decision-making.
Michael Brown, a market analyst at London-based online broker Pepperstone, observed that the market is currently filled with a "broad lack of confidence" and traders are more inclined to wait and see, waiting for clear guidance from Wednesday's "dot plot" forecasts and Powell's press conference.
Nomura analysts emphasized in a report that this rate cut is more of an "insurance" measure, and the pace of easing will remain gradual. This means the Fed will not act all at once, but rather proceed with caution to avoid excessive stimulus that could trigger a rebound in inflation. The break-even yield on 10-year TIPS is 2.366%, suggesting that the market expects an average annual inflation rate of approximately 2.4% over the next decade, consistent with the Fed's dovish approach. For gold, this gradual rate cut will continue to suppress the dollar and yields. The next upside target in the short term is $3,700, followed by potential challenges at $3,730 and $3,743.
Gold's strength isn't limited to Western markets; factors from major powers are quietly becoming a powerful driver of the rally. Reports on Monday that a major Asian nation may relax gold import and export regulations directly spurred strong buying. Independent metals trader Tai Wong noted that official and private demand are considered the primary drivers of gold's gains. In an Asian nation like the world's largest gold consumer, easing regulations means more funds will flow into the physical gold market, further exacerbating demand pressures.
Globally, this week will also see interest rate decisions from the Bank of Japan, the Bank of England, the Bank of Canada, and the Norges Bank. While the two are expected to keep rates unchanged, analysts will be closely watching the Bank of England's plan to slow its reduction of government bond holdings and comments from the Bank of Japan, which may reveal hints of rate hikes for the remainder of the year. Last Friday, Fitch downgraded France's sovereign credit rating to AA- due to its increasing debt burden, but the euro remained largely unaffected. Nick Rees, Head of Macro Research at Monex Europe, believes the market has already priced in this news. This collective appearance of central bank meetings will provide gold with a further uncertainty premium, boosting its appeal as a safe-haven asset.
Gold's rally wasn't isolated; it also benefited from a broad-based rally in the U.S. stock market on Monday. All three major indices closed higher, with the S&P 500 up 0.47% to 6,615.28, the Nasdaq soaring 0.94% to 22,348.75, and the Dow Jones Industrial Average inching up 0.11% to 45,883.45. Tech giants in particular led the charge: Google's parent company, Alphabet, saw its stock price hit a record high, surpassing $3 trillion in market capitalization for the first time, driving the communications services sector up 2.33%. Tesla's stock price rose 3.6% after CEO Elon Musk spent nearly $1 billion on stock buybacks on Friday, pushing the consumer discretionary sector to a nearly nine-month high.
Carol Schleif, Chief Investment Officer of BMO Family Office, described this as a "Goldilocks" scenario: the job market weakens just enough to prompt the Fed to initiate a series of rate cuts without disrupting overall economic growth. While the market might be disappointed if the Fed doesn't signal continued rate cuts, the current bets are optimistic. The overall strength of tech stocks has injected vitality into the stock market and indirectly benefited gold: a broad stock market rally is often accompanied by a rebound in risk appetite, but the expectation of a Fed rate cut strengthens safe-haven demand, creating a "win-win" situation for gold and the stock market.
Looking back on the week, both the Nasdaq and S&P 500 recorded weekly gains, reaching record highs intraday on Friday. The resilience of technology stocks provided a stable macroeconomic backdrop for gold. The two-year/10-year Treasury yield spread was positive at 49.7 basis points, with the two-year yield falling to 3.535%. These curve signals point to the possibility of a soft landing for the economy, further consolidating gold's bullish outlook.
In summary, this round of record gold prices is the result of a combination of favorable factors: a weak dollar, falling US Treasury yields, expectations of a Fed rate cut, surging Chinese demand, and a broad rally in global stock markets. Monday's gold price performance not only priced in short-term expectations but also paved the way for a year-end easing cycle. In the short term, the $3,700 mark will be a key test. If the Fed's meeting on Wednesday delivers dovish signals, gold prices could easily break through. Conversely, if political pressure leads to unexpectedly hawkish rhetoric, a brief pullback could be triggered.
For investors, this is a window not to be missed: gold is not only an inflation hedge but also an "insurance policy" against geopolitical and policy uncertainty. However, as Scott Welch noted, once the rate cut is confirmed, the market may experience a sell-off, and investors should be wary of the risk of yields rising due to inflation concerns.
In addition, the U.S. August retail sales monthly rate, commonly known as the "horror data," will be released on this trading day and requires special attention.
(Spot gold daily chart, source: Yihuitong)
At 06:48 Beijing time, spot gold was trading at $3677.75 per ounce.
A weaker dollar and falling U.S. Treasury yields are catalysts for new highs in gold prices.
The surge in gold prices was primarily due to the obvious weakness of the US dollar and the simultaneous decline in US Treasury yields.
On Monday, the US dollar index fell 0.3%, hitting a near one-week low of 97.26 before closing at 97.33. This decline makes gold more attractive to investors holding other currencies, as the depreciation of the US dollar directly reduces the relative cost of holding gold. Imagine, when the US dollar slides like a deflated ball, global capital naturally flows into "hard currencies" like gold, seeking to preserve and increase its value.
Meanwhile, signals from the U.S. Treasury market are also bullish for gold. The 10-year Treasury yield fell 2.6 basis points to 4.034%, marking its third consecutive day of decline. The 30-year Treasury yield also fell 2.6 basis points to 4.653%. This downward-sloping yield curve stems from a series of recent economic data that have signaled a weakening labor market. For example, the New York Fed's manufacturing index unexpectedly came in at -8.7, the first time it has fallen into negative territory since June and well below economists' expectations of a positive 5.0. This data served as a wake-up call, rekindling market concerns about slowing economic growth and further reinforcing the urgency of a Federal Reserve interest rate cut.
In this environment, Certuity Chief Investment Officer Scott Welch's perspective is quite representative, noting that investors are adjusting their positions by "buying on the news and selling after the facts are confirmed." If the expected Fed rate cut materializes, barring unexpected hawkish signals, long-term bond yields may not continue to fall significantly, but inflation concerns may drive them up slightly in the short term. This provides valuable breathing space for gold—falling yields reduce the opportunity cost of holding non-interest-bearing assets like gold, naturally attracting an influx of funds.
On the eve of the Federal Reserve meeting: a 25 basis point rate cut is a foregone conclusion, and the market is betting on "gradual easing"
This week's Federal Reserve meeting is undoubtedly the focus of global financial markets. The policy review, which begins on Tuesday and is expected to be announced on Wednesday, will directly set the tone for the pace of monetary easing for the rest of the year.
According to CME's FedWatch tool, the market has almost fully priced in a 25 basis point rate cut, with a 96% probability, while the probability of a more aggressive 50 basis point cut is only 4-5%.
Peter Grant, vice president and senior metals strategist at Zaner Metals, said frankly that this expectation has been basically digested, but there may be "one or two" additional interest rate cuts before the end of the year, which provides solid support for the long-term upward trend of gold.
The meeting was particularly significant due to intensified external pressure. US President Trump again called on Federal Reserve Chairman Jerome Powell on Monday to cut interest rates "even more aggressively," even citing the weakness in the real estate market as pressure for accelerated policy easing.
Meanwhile, the Senate will vote on Wednesday to confirm Trump's economic adviser, Milan, to join the interest rate-setting committee, which could further amplify the influence of political factors on the Fed's decision-making.
Michael Brown, a market analyst at London-based online broker Pepperstone, observed that the market is currently filled with a "broad lack of confidence" and traders are more inclined to wait and see, waiting for clear guidance from Wednesday's "dot plot" forecasts and Powell's press conference.
Nomura analysts emphasized in a report that this rate cut is more of an "insurance" measure, and the pace of easing will remain gradual. This means the Fed will not act all at once, but rather proceed with caution to avoid excessive stimulus that could trigger a rebound in inflation. The break-even yield on 10-year TIPS is 2.366%, suggesting that the market expects an average annual inflation rate of approximately 2.4% over the next decade, consistent with the Fed's dovish approach. For gold, this gradual rate cut will continue to suppress the dollar and yields. The next upside target in the short term is $3,700, followed by potential challenges at $3,730 and $3,743.
Global demand surges: the "Eastern engine" of gold's rise
Gold's strength isn't limited to Western markets; factors from major powers are quietly becoming a powerful driver of the rally. Reports on Monday that a major Asian nation may relax gold import and export regulations directly spurred strong buying. Independent metals trader Tai Wong noted that official and private demand are considered the primary drivers of gold's gains. In an Asian nation like the world's largest gold consumer, easing regulations means more funds will flow into the physical gold market, further exacerbating demand pressures.
Globally, this week will also see interest rate decisions from the Bank of Japan, the Bank of England, the Bank of Canada, and the Norges Bank. While the two are expected to keep rates unchanged, analysts will be closely watching the Bank of England's plan to slow its reduction of government bond holdings and comments from the Bank of Japan, which may reveal hints of rate hikes for the remainder of the year. Last Friday, Fitch downgraded France's sovereign credit rating to AA- due to its increasing debt burden, but the euro remained largely unaffected. Nick Rees, Head of Macro Research at Monex Europe, believes the market has already priced in this news. This collective appearance of central bank meetings will provide gold with a further uncertainty premium, boosting its appeal as a safe-haven asset.
Stock market linkage effect: a win-win situation for tech stocks and gold
Gold's rally wasn't isolated; it also benefited from a broad-based rally in the U.S. stock market on Monday. All three major indices closed higher, with the S&P 500 up 0.47% to 6,615.28, the Nasdaq soaring 0.94% to 22,348.75, and the Dow Jones Industrial Average inching up 0.11% to 45,883.45. Tech giants in particular led the charge: Google's parent company, Alphabet, saw its stock price hit a record high, surpassing $3 trillion in market capitalization for the first time, driving the communications services sector up 2.33%. Tesla's stock price rose 3.6% after CEO Elon Musk spent nearly $1 billion on stock buybacks on Friday, pushing the consumer discretionary sector to a nearly nine-month high.
Carol Schleif, Chief Investment Officer of BMO Family Office, described this as a "Goldilocks" scenario: the job market weakens just enough to prompt the Fed to initiate a series of rate cuts without disrupting overall economic growth. While the market might be disappointed if the Fed doesn't signal continued rate cuts, the current bets are optimistic. The overall strength of tech stocks has injected vitality into the stock market and indirectly benefited gold: a broad stock market rally is often accompanied by a rebound in risk appetite, but the expectation of a Fed rate cut strengthens safe-haven demand, creating a "win-win" situation for gold and the stock market.
Looking back on the week, both the Nasdaq and S&P 500 recorded weekly gains, reaching record highs intraday on Friday. The resilience of technology stocks provided a stable macroeconomic backdrop for gold. The two-year/10-year Treasury yield spread was positive at 49.7 basis points, with the two-year yield falling to 3.535%. These curve signals point to the possibility of a soft landing for the economy, further consolidating gold's bullish outlook.
The future of gold: opportunities and risks coexist, investors need to be wary of the "shoe drops" market
In summary, this round of record gold prices is the result of a combination of favorable factors: a weak dollar, falling US Treasury yields, expectations of a Fed rate cut, surging Chinese demand, and a broad rally in global stock markets. Monday's gold price performance not only priced in short-term expectations but also paved the way for a year-end easing cycle. In the short term, the $3,700 mark will be a key test. If the Fed's meeting on Wednesday delivers dovish signals, gold prices could easily break through. Conversely, if political pressure leads to unexpectedly hawkish rhetoric, a brief pullback could be triggered.
For investors, this is a window not to be missed: gold is not only an inflation hedge but also an "insurance policy" against geopolitical and policy uncertainty. However, as Scott Welch noted, once the rate cut is confirmed, the market may experience a sell-off, and investors should be wary of the risk of yields rising due to inflation concerns.
In addition, the U.S. August retail sales monthly rate, commonly known as the "horror data," will be released on this trading day and requires special attention.
(Spot gold daily chart, source: Yihuitong)
At 06:48 Beijing time, spot gold was trading at $3677.75 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.
