Gold Rallies to New Highs on Soft NFP, but Upcoming US CPI Poses Risk to Gains
Key Takeaways
- •Gold rallied to fresh highs after the softer-than-expected Nonfarm Payrolls report led investors to dial back Federal Reserve rate hike expectations.
- •The unemployment rate declined to 4.1%, indicating the labor market remains healthier than the headline jobs number suggested.
- •The upcoming US CPI report is expected to be pivotal for the September FOMC decision and the Jackson Hole Symposium outlook.
- •A hotter-than-expected CPI print could trigger gold selling pressure, while a soft reading may boost gold toward additional gains.
- •On the daily chart, gold is nearing a major trendline around the 4,500 level, where sellers are anticipated to emerge with a pullback target near 3,885.
Fundamental Overview
Gold pushed into new highs yesterday after Friday's softer-than-expected Nonfarm Payrolls (NFP) report triggered a dovish repricing of Federal Reserve interest rate expectations. Gold, which yields no interest, typically benefits when expectations shift toward lower or stable rates, as it reduces the opportunity cost of holding the metal relative to interest-bearing assets.
The underlying data, however, was not as weak as the headline figure suggested. A significant loss of government jobs made the report appear softer than the broader picture indicated. The unemployment rate, in fact, told a different story, declining further to 4.1%. The labor market remains on a healthier trajectory compared to the past three years.
Today, price action may remain largely rangebound, though some hedging ahead of tomorrow's US CPI release could introduce modest weakness. The CPI data will be pivotal for the September FOMC decision and the upcoming Jackson Hole Symposium, where Fed Chair Jerome Powell has historically used the keynote address to signal the policy direction for the months ahead.
A hotter-than-expected CPI report would likely trigger a gold selloff as traders increase bets on further rate hikes. Conversely, a soft report should further diminish the risk of Fed tightening and provide gold with another boost to extend its rally into fresh highs.
Gold Technical Analysis – Daily Timeframe
On the daily chart, gold has nearly reached the major trendline around the 4,500 level. Sellers are expected to step in at that zone with defined risk above the trendline, positioning for a pullback toward the 3,885 level. Buyers, meanwhile, will look for a breakout above to increase bullish positions toward the 4,800 level next.
Gold Technical Analysis – 4-Hour Timeframe
On the 4-hour chart, a minor upward trendline defines the bullish structure. Buyers will likely defend this trendline with defined risk below it to continue pushing toward new highs. Sellers, on the other hand, will await a breakout below to target the 4,200 support level.
Gold Technical Analysis – 1-Hour Timeframe
On the 1-hour chart, buyers have a more favorable risk-to-reward setup around the minor trendline, while sellers will need to wait for either a break below it or a rally into the major trendline. The red lines on the chart define the average daily range for the session.
Upcoming Catalysts
- Tuesday: US CPI report
- Thursday: US PPI data and latest US Jobless Claims figures
- Friday: US Retail Sales and the University of Michigan Consumer Sentiment report
