Gold and Silver Technical Analysis: XAUUSD Hits $3,600 as Weak Jobs Fuel Fed Rate Cut Bets
News Summary
Gold (XAUUSD) prices surged to a new all-time high of $3,600, and silver also saw strong gains, driven by weak US jobs data. The August Nonfarm Payrolls report revealed only 22,000 jobs created, significantly below forecasts, with the unemployment rate rising to 4.3%. While wage growth remained steady, this soft labor market data intensely fueled speculation that the Federal Reserve would resume rate cuts in September, with market tools indicating a 92% chance of a 25-basis-point cut. Consequently, Treasury yields plunged across the curve, with the 10-year yield approaching the critical 4% support level. The US Dollar Index weakened towards 97.50, enhancing gold's appeal as a safe-haven asset. Furthermore, President Trump's dismissal of Fed Governor Lisa Cook raised fresh doubts about the Fed's independence, providing additional political uncertainty support for precious metals. Technically, gold broke above $3,500 and achieved its highest weekly close on record, suggesting sustained bullish momentum through the rest of 2025, though the RSI is in overbought territory. Silver also broke above $35, indicating strong bullish momentum, with any correction likely seen as a buying opportunity. The US Dollar Index shows a bear flag pattern, signaling potential further downside towards the 90 area.
Background
The Federal Reserve's monetary policy objectives include achieving maximum employment and price stability. Typically, strong employment data provides the Fed with reason to maintain or tighten monetary policy to combat inflation, while weak employment data increases pressure for rate cuts to stimulate economic growth. Since President Trump's re-election in 2024, concerns about the Fed's independence have persisted. The Trump administration has historically favored lower interest rates and has openly criticized the Fed's policy direction. The dismissal of Fed Governor Lisa Cook further intensifies market anxieties regarding the Fed potentially being pressured into a more accommodative stance under political influence.
In-Depth AI Insights
Does the weak jobs data signal a shift towards a more aggressive Fed rate-cutting cycle, rather than just a cyclical adjustment? - The mere 22,000 nonfarm payroll increase and 4.3% unemployment rate significantly missed market expectations, suggesting not just an economic slowdown, but potentially an acceleration of structural weaknesses in the labor market. This could force the Fed into a more aggressive or sustained rate-cutting path than the market's current 92% expectation (25 basis points) to avert a hard landing. - While wage growth remained stable, if job creation continues to dwindle, the momentum of wage increases will be difficult to sustain. The Fed might prioritize addressing downside risks in the job market, viewing stable wage growth as a lagging indicator. What are the deeper implications of the Trump administration's dismissal of a Fed Governor on the Fed's long-term independence and the dollar's reserve currency status? - Such political intervention undermines the Fed's credibility as an independent institution, potentially eroding market trust in its decisions over the long term. If investors begin to perceive Fed policy as politically influenced rather than purely data-driven, the attractiveness of the dollar as a global reserve currency could diminish. - This uncertainty could lead to sustained increased demand for safe-haven assets like gold, as it offers a store of value less directly subject to government or central bank policy. It might also prompt other nations to reassess their foreign exchange reserve allocations, seeking diversification to mitigate dollar risk. Given gold has reached overbought levels and new all-time highs, how should investors assess its upside potential versus potential correction risks for the remainder of 2025? - While technical indicators show strong breakouts and bullish momentum, the overbought RSI signal should not be ignored, indicating a potential short-term pullback or consolidation. - Investors should closely monitor upcoming inflation data. If inflation continues to show disinflationary trends, it will further solidify rate cut expectations, supporting gold prices. Conversely, an unexpected rebound in inflation could weaken the case for rate cuts, triggering a gold price correction. - Political uncertainty (such as further political interventions or international tensions) will continue to provide structural support for gold prices, but short-term volatility will remain highly dependent on the interpretation of macroeconomic data and the Fed's actual policy actions.