Gold (XAU/USD) hit a fresh record high above $3,670 last week before pausing for breath, as traders brace for the Federal Reserve’s (Fed) key policy decisions. With overbought signals flashing on the charts, the upcoming FOMC meeting could determine whether the metal extends its rally or slips into correction.
Gold Near Records Amid USD Weakness and Geopolitical Risks
The week began on a strong note for Gold, lifted by lingering pressure on the US Dollar (USD) after disappointing August labor market data. A 1% surge on Monday set the tone, and by Tuesday, XAU/USD registered a new all-time high above $3,670, supported further by rising geopolitical tensions.
The US Bureau of Labor Statistics (BLS) revised employment data lower by 911,000 jobs for the year through March 2025, highlighting cracks in the labor market. Meanwhile, geopolitical headlines intensified safe-haven demand:
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Israel claimed responsibility for a strike on senior Hamas leaders in Doha, Qatar.
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Qatar denounced the action as a violation of international law.
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Poland reported shooting down suspected Russian drones in its airspace, prompting NATO to convene Article 4 talks on regional security threats.
These developments bolstered Gold’s appeal as a safe-haven asset.
Mixed US Data Limits USD Recovery
US inflation data offered little relief to the Dollar. The Producer Price Index (PPI) slowed to 2.6% YoY in August, missing expectations, while Consumer Price Index (CPI) inflation ticked up to 2.9% YoY as forecast. At the same time, labor market strain persisted, with Initial Jobless Claims climbing to 263,000.
Consumer sentiment also weakened, with the University of Michigan Index falling to 55.4, underscoring cautious household outlooks. Despite brief corrections, XAU/USD held firm in the upper half of its weekly range.
Spotlight on the Fed
Markets are laser-focused on the Fed’s policy meeting this Wednesday. Alongside its rate decision, the central bank will release the Summary of Economic Projections (SEP), which could reshape market expectations for the year ahead.
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A 50 bps cut would likely trigger heavy USD selling and a sharp rally in Gold. However, if paired with cautious guidance, the Dollar could rebound, limiting XAU/USD’s upside.
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A 25 bps cut remains the base case. Still, Gold could extend gains if the dot plot signals a dovish shift with three or more cuts penciled in for 2026.
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Conversely, if the SEP projects only one or two cuts, the Dollar could regain strength, fueling a deeper correction in Gold.
Chair Jerome Powell’s press conference will be equally critical. A downbeat tone on jobs and growth could pressure the USD, while renewed emphasis on inflation risks could do the opposite.
Technical Outlook
Gold remains technically stretched, with the Relative Strength Index (RSI) holding well above 70 in overbought territory.
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Support: First sits at $3,600, followed by $3,500–$3,480 (20-day SMA and static zone).
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Resistance: Initial barrier at $3,700, with stronger hurdles at $3,795–$3,800 near the upper bound of the current ascending channel.
The overall bias remains bullish, but overbought conditions suggest the risk of a pullback before another potential leg higher.
This forecast is intended for informational purposes only and should not be taken as financial advice.
