Fed Cut Fever Fuels Gold’s Historic Surge

Key Takeaways:

*DXY near multi-month lows after dismal U.S. jobs data.

*Markets price a September Fed cut; CPI data now pivotal.

*Gold surges above $3,640/oz, up 38% YTD, driven by Fed bets.

Market Summary:

The U.S. Dollar Index (DXY) extended its slide toward 97.50 on Tuesday, weighed down by last week’s catastrophic U.S. jobs report and mounting expectations of imminent Fed easing. August payrolls delivered only 22,000 jobs while the unemployment rate climbed to 4.3%, its highest since late 2021. The figures have effectively locked in a September rate cut, with futures pricing a 90% probability of a 25-bp move and even a small chance of 50 bps. Treasury yields have edged lower in tandem, leaving the greenback vulnerable. Markets now turn their attention to this week’s inflation test—Wednesday’s PPI and Thursday’s CPI—where headline CPI is expected to rise to 2.9% YoY from 2.7% in July, with core steady at 3.1%. A soft outcome would reinforce dovish bets and risk breaking DXY below 97.00 toward 96.50, while an upside surprise may only offer temporary relief.

Gold, by contrast, has surged into uncharted territory, smashing records above $3,640/oz and climbing nearly 38% year-to-date. The rally is powered by a convergence of forces: Fed-driven monetary easing, structural reserve diversification, and acute safe-haven demand. The People’s Bank of China boosted reserves for a tenth consecutive month in August, underscoring a global de-dollarization push that has seen central banks collectively hold more bullion than Treasuries for the first time since the mid-1990s. Political turmoil has added fuel, from the resignation of Japan’s Prime Minister Shigeru Ishiba to the ousting of French PM François Bayrou, while ongoing trade frictions and geopolitical tensions sustain the bid for gold. Structural risks are also rising: Goldman Sachs warned that political pressure on the Fed could trigger a “Fed independence trade,” prompting investors to rotate from Treasuries into bullion, potentially driving gold toward $5,000/oz.

Taken together, the dollar and gold embody opposite ends of the market’s response to U.S. policy uncertainty. The greenback remains under siege from weak data, rate-cut expectations, and doubts over Fed credibility, while bullion thrives on falling real yields, central-bank accumulation, and geopolitical risk. This week’s inflation prints and forthcoming labor-market revisions will be critical in determining whether the DXY can stabilize—or whether gold’s historic bull run gathers even greater momentum into year-end.

Technical Analysis

DXY, H4: 

The US Dollar Index extended its slide on the chart, breaking decisively below the 98.10 support and edging toward the next key floor at 97.65. Price action now hovers around 97.40, with downside risks mounting should bears maintain control. A clear break beneath 97.65 could open the way toward the 97.10 handle, while recovery attempts face resistance at 98.08 and stronger supply near 98.75.

Momentum indicators underscore the bearish bias. The RSI has slipped to 32, nearing oversold territory but not yet signaling exhaustion, while the MACD remains firmly in negative territory, with widening bearish momentum suggesting that selling pressure is still dominant.

The broader structure remains fragile, with DXY at risk of extending losses unless buyers step in near the 97.10–97.65 demand zone. Only a rebound above 98.10 would ease immediate downside pressure and signal scope for corrective upside.

Resistance level: 97.65, 98.10

Support level: 97.10, 96.50

GOLD, H4: 

Gold extended its rally on the chart, climbing to fresh highs near $3,636 as bullish momentum carried prices firmly above the key $3,590–$3,600 resistance band. This latest advance builds on the strong breakout from the $3,523 pivot zone, reinforcing the broader uptrend structure. Immediate resistance is now seen at $3,662, while downside support rests at $3,590 and further at $3,553, levels that could attract dip buyers if a retracement unfolds.

Momentum indicators, however, are flashing signs of divergence. The RSI stands elevated at 78, firmly in overbought territory, but showing bearish divergence against price hinting at potential exhaustion in the rally. Similarly, the MACD remains in positive territory but has begun to flatten, with early signs of convergence suggesting waning upside momentum.

In the near term, Gold remains in a strong bullish structure, but stretched technicals raise the risk of a corrective pullback. A sustained move above $3,662 would reaffirm the bullish breakout, targeting higher Fibonacci extensions, while a slip below $3,590 could trigger profit-taking toward $3,553 and even $3,510 if sellers press further.

Resistance level: 3662.00, 3700.00

Support level: 3590.00, 3553.00