Gold is testing the resistance level at $3,450, but a breakout doesn’t seem likely right now. The recent price rise is a result of dovish comments from Powell last Friday, amid rising inflation expectations and dropping Treasury yields. Currently, there is no strong reason behind this rally, which hints it might be a short spike before a bigger downturn. Next week, all eyes will be on US labor market data, especially the NFP report due on Friday. If the report is strong, it could increase the chances of a September rate cut, which might push gold prices down. Conversely, weak data could lead to higher gold prices.

Gold’s Long-Term Outlook

Gold’s long-term prospects look positive due to expected declines in real yields as the Fed eases. In the short term, recent hawkish shifts in interest rate outlooks may cause market corrections. On the daily chart, gold is at the high end of a four-month trend, and sellers may see resistance as a chance to push prices down to $3,245. The one-hour chart reflects a recent positive trend stemming from Powell’s comments last Friday. Buyers have returned at the trendline and might do so again during pullbacks, while sellers are eyeing a drop to $3,245. Today’s average range is marked with red lines, indicating limited movement past resistance. Momentum indicators suggest a potential pullback is coming. Next week’s US labor market data will be key for gold, where hawkish changes might drag down prices and dovish outlooks could send them higher. Gold is currently testing the important $3,450 resistance level, but a breakout seems unlikely at this moment. The recent rise was driven by dovish Fed comments last Friday, lowering the 10-year Treasury yield to 3.15%, the lowest since early 2024. While the July 2025 CPI remains steady at 3.4%, falling nominal yields have pushed real yields down, making gold, which doesn’t yield anything, more appealing. Today’s rise appears unstable, lacking a new trigger and showing divergence on momentum indicators. This suggests we could see a final push before a correction, especially at the top of its average daily range. For traders using derivatives, buying call options now might risk getting caught in a reversal.

Market Focus on Labor Data

The market is now focused on next week’s US labor market data, leading up to the Non-Farm Payrolls report on Friday, September 5th. This week’s initial jobless claims data rose slightly to 245,000, hinting at softening, which makes the NFP report even more important. A strong report may cause a hawkish shift that could lower gold prices, while a weak report might boost bets on further rate cuts, pushing gold to new highs. Given this uncertainty, traders should think about strategies to profit from a significant market movement. Buying short-dated put options with a strike near $3,400 can limit risks while preparing for a potential rejection from resistance after strong labor data. On the other hand, traders expecting a breakout from weak data might consider call options with a strike price above $3,450 to target possible gains. For futures traders, entering a short position near the $3,450 resistance with a tight stop-loss just above aligns with the belief that a pullback is imminent. Long positions may not be wise until we see a confirmed breakout above this key level. Patience is essential; making a trade before the NFP data may feel like a gamble. We’ve seen this pattern before, especially when reviewing market dynamics from late 2023 to early 2024. Back then, the anticipation of a Fed pivot led to a significant rally in gold lasting months. The current situation resembles that period, reinforcing the idea that while the long-term trend looks up due to Fed easing, short-term corrections from economic data are likely. Create your live VT Markets account and start trading now.

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