Gold price has risen above the 20-day EMA, driven by growing expectations of Fed interest rate cuts. Soft US NFP data has pressured US Treasury yields, which are now at a near three-month low of 4.20%.
The US added 73K new jobs, falling short of the 110K forecast. The unemployment rate rose to 4.2%, with June employment figures revised down to 14K from 147K.
Fed Rate Cut Probabilities
Following the NFP report, the probability of a Fed rate cut in September has increased to 80.8%. Before this data, there was reduced expectation for a cut after Fed Chair Powell’s comments on tariff impacts.
Gold trades near $3,350 and maintains a sideways trend within a Symmetrical Triangle, reflecting market indecision. The RSI for Gold is between 40.00-60.00, indicating reduced volatility.
If Gold falls below $3,245, it may drop to $3,200 and $3,121. A break above $3,500 could lead to resistances at $3,550 and $3,600.
Central banks, significant holders of Gold, added 1,136 tonnes in 2022, the largest annual purchase. Gold’s price movements are influenced by the US Dollar’s strength, as it is priced in dollars and inversely related to it and US Treasuries.
Market Response to Economic Weakness
Given the weak US jobs report from August 1st, we see the chance of a September Fed rate cut has now surged to over 80%. This has immediately pressured US Treasury yields and the dollar, creating a favorable environment for gold. These expectations of looser monetary policy should be the primary focus for traders in the coming weeks.
This economic weakness is clearly reflected in the currency and bond markets. We have watched US Treasury yields sink to a near three-month low of 4.20%, and in response, the US Dollar Index (DXY) has fallen 1.2% in just two days to trade below 103.50. This inverse relationship is critical, as a weaker dollar directly supports higher gold prices.
For derivative traders, the current situation is particularly interesting because gold is consolidating in a Symmetrical Triangle pattern near $3,350. The low volatility, shown by the Relative Strength Index (RSI) staying between 40 and 60, makes options strategies like long straddles relatively inexpensive. This could be a way to position for the large price swing we expect once the market’s indecision breaks.
We should remember the sharp rally in late 2023, when gold surged over 15% as markets began to anticipate the Fed’s pivot away from rate hikes. The current setup, with soft data preceding a potential rate cut, feels very similar. History suggests that once gold breaks out of its current tight range, the move could be powerful.
Underneath this short-term activity, we see strong underlying support from central banks, which continue to be major buyers. While their record purchases in 2022 provided a strong historical base, World Gold Council data for the second quarter of 2025 shows they still added a net 228 tonnes to their reserves. This consistent demand provides a strong safety net for the gold price.
Our strategy is to watch the key technical levels closely for the breakout. A sustained move below the triangle’s support at $3,245 would signal a bearish turn, targeting the $3,200 level. However, a break above the significant resistance at $3,500 would confirm a new bullish trend, opening the door to test $3,550.
