Gold prices have risen above the 20-day EMA, thanks to increasing expectations for interest rate cuts by the Fed. Weak US Non-Farm Payroll (NFP) data has pushed US Treasury yields down to a near three-month low of 4.20%. The US economy added 73,000 jobs, which is lower than the expected 110,000. The unemployment rate increased to 4.2%, and June’s job figures were revised down significantly from 147,000 to just 14,000.

Fed Rate Cut Expectations

After the NFP report, the chance of a Fed rate cut in September has jumped to 80.8%. Before this data was released, expectations for a cut had decreased due to Fed Chair Powell’s remarks on tariffs. Gold is currently trading around $3,350 and is following a sideways trend within a Symmetrical Triangle pattern, indicating uncertainty in the market. The Relative Strength Index (RSI) for Gold is between 40.00 and 60.00, suggesting low volatility. If Gold dips below $3,245, it might slide to $3,200 and then $3,121. Conversely, if it breaks above $3,500, it could face resistance at $3,550 and $3,600. In 2022, central banks, which are important Gold holders, purchased 1,136 tonnes of Gold, marking the largest annual buy. Gold prices are impacted by the strength of the US Dollar since Gold is priced in dollars and often moves in the opposite direction of it and US Treasuries.

Market Reaction to Economic Weakness

The disappointing US jobs report from August 1st has led to a spike in the likelihood of a September Fed rate cut, now exceeding 80%. This has caused US Treasury yields and the dollar to drop, creating a favorable backdrop for Gold. Traders should focus on these expectations of easier monetary policy in the upcoming weeks. This economic weakness is evident in both currency and bond markets. US Treasury yields have fallen to a near three-month low of 4.20%, and the US Dollar Index (DXY) has dropped 1.2% in just two days, now trading below 103.50. This inverse relationship is important, as a weaker dollar supports higher Gold prices. For derivative traders, the current market is intriguing because Gold is consolidating within a Symmetrical Triangle pattern near $3,350. The low volatility, indicated by the RSI remaining between 40 and 60, makes options strategies like long straddles more affordable. This could allow traders to prepare for a significant price movement as market indecision resolves. Remember the rapid increase in late 2023 when Gold surged by over 15% as markets anticipated a shift away from Fed rate hikes. The current situation, with soft data hinting at a potential rate cut, feels similar. History indicates that once Gold breaks free from its tight range, the move could be significant. Beneath this short-term activity, we see strong support from central banks, which are still major buyers of Gold. Their record purchases in 2022 laid a firm foundation, and World Gold Council data shows they added 228 tonnes to their reserves in the second quarter of 2025. This ongoing demand creates a strong safety net for Gold prices. Our plan is to closely monitor key technical levels for any breakout. A sustained move below the triangle’s support at $3,245 would indicate a bearish trend, targeting $3,200. On the other hand, a push above the strong resistance at $3,500 would confirm a new bullish trend, paving the way to test $3,550. Create your live VT Markets account and start trading now.

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