Gold Prices Hit All-Time High – What’s Driving the Rally

US Monetary Policy Shift

Hints from Federal Reserve Chair Jerome Powell last month about a weakening labor market opened the door for policymakers to shift focus away from inflation data and pay closer attention to employment trends. This encouraged investors to price in a 25-basis-point rate cut at the September meeting.

The August US jobs report later confirmed a sharp deterioration in the labor market, reinforcing expectations of further easing. Markets are now anticipating two additional 25-basis-point cuts
(one in October and another in December).

Interestingly, investors are anticipating the Fed is preparing for a full rate-cutting cycle at a time when inflation remains above the 2% target and continues to move in the opposite direction of policymakers’ preferred trajectory.

Gold Maintains Momentum

Gold prices have risen nearly 40% since the start of the year, supported initially by aggressive central bank buying, particularly from the People’s Bank of China, which has added tons of gold since late 2024. Although central bank purchases slowed as prices climbed, gold has remained resilient, underpinned by geopolitical tensions that encouraged investors to hold long positions.

Following the release of the US jobs report, which led markets to price in multiple interest rate cuts, precious metals gained support from the weaker US dollar, with gold climbing to $3,659 today. However, interest rate expectations may not be the sole driver. Market fears of a potential loss of Federal Reserve independence are also in play. If the US judiciary upholds President Trump’s decision to dismiss Fed Governor Lisa Cook, Trump could gain significant influence over monetary policy after Jerome Powell’s term ends. This raises the prospect of aggressive rate cuts followed by a possible new round of quantitative easing, potentially weakening the US dollar further adding more fuel to gold’s rally.

Technical Outlook – Gold Prices

In early September, gold decisively broke above the $3,500/oz resistance level (the April 22 high), extending to fresh all-time highs. Prices are now, seems to be heading towards the high end of the current $3,600–$3,700 trading zone. A daily close above $3,700 would confirm strong bullish momentum and open the door for further gains possibly towards $3,800.

Levels to Watch in a Pullback Scenario

A daily close below $3,600 would signal waning bullish momentum and the exit of some long positions, potentially driving prices back toward $3,500. The Relative Strength Index is currently in overbought territory above 70. Any drop of the RSI below this threshold would indicate fading upside momentum and could invite additional selling pressure.