Gold prices jumped over 1.50% after a disappointing Nonfarm Payrolls report in the US, indicating a weak job market. Rising tensions between Russia and the US also increased demand for gold, pushing prices close to $3,350.

Expectations of Federal Reserve Actions

After the data from July, the chances of a Federal Reserve interest rate cut increased, even with a slight change in the Unemployment Rate. The Institute for Supply Management noted that manufacturing activity is still low, and Consumer Sentiment, according to the University of Michigan survey, has declined. Gold’s drop to $3,268 reversed due to weak jobless claims data. Revisions for payrolls in May and June revealed a significant cut of 258,000 jobs, marking one of the largest adjustments in two months since 1979. The CBOT December 2025 fed funds rate futures suggest at least 57 basis points of easing by the end of the year. There is a 76% chance of a 25 basis point rate cut in September, bringing rates to the 4.00-4.25% range. In geopolitical news, US actions against Russia, such as positioning nuclear submarines, have heightened tensions. This was in response to Russian comments about US actions being aggressive, particularly due to a shortened deadline for a peace deal with Ukraine. Gold typically moves in the opposite direction of the US Dollar and treasuries. A weaker US Dollar can boost gold prices, while rising stock markets may drive them down. Gold also serves as a safe-haven asset during geopolitical or economic uncertainty.

Reinforcing the Bullish Outlook on Gold

The weak Nonfarm Payrolls report on August 1st, 2025, showed only 95,000 jobs added, far below expectations and highlighting a cooling labor market. This data suggests the Federal Reserve may act soon, reinforcing a bullish outlook on gold for derivative traders. There’s a high likelihood of a Fed rate cut in September, which weakens the US Dollar and raises gold prices. The July Consumer Price Index indicated core inflation fell to 3.8%, giving the Fed more flexibility to ease policy. This makes holding gold, a non-yielding asset, more appealing. Given this situation, buying call options on gold could be a good move. Options with strikes around $3,400 to $3,450 for October or November could benefit from the expected price rise. While implied volatility is increasing, this strategy offers leveraged exposure to potential gains. For futures traders, maintaining long positions in the December 2025 contract (GCZ5) looks promising. We should set stop-loss orders around the recent low of $3,268 to manage risk if economic data shifts unexpectedly. Growing tensions with Russia create a strong price floor for gold, acting as a key safe-haven driver. Recent satellite images showing Russian naval movements in the Baltic Sea have heightened market anxiety. This geopolitical risk is not diminishing, likely continuing to support gold demand. We’ve seen similar situations before, such as in mid-2019 when the Fed started cutting rates amid economic uncertainty. That change led to a significant rally in gold prices. History suggests we may be at the start of another strong upward trend. The U.S. Dollar Index (DXY) dropped below 102.50 following the jobs report, providing immediate support for gold prices. Major gold ETFs like SPDR Gold Shares (GLD) have also seen large inflows this week, indicating that institutional investors share this optimistic view. This broad support suggests the rally is likely to continue. Create your live VT Markets account and start trading now.

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