Next leg of Gold’s record run hinges on US Federal Reserve outlook

Gold outlook for next week

Risk appetite received a boost as US inflation and labour market data cemented the likelihood of a rate cut at the FOMC’s September meeting.

The dollar held below the 98 level amid growing expectations that the Federal Reserve will resume monetary easing this month. US core CPI rose by 0.3 percent in August, matching July’s pace, while headline CPI came in slightly hotter than expected at 0.4 percent. However, producer price data softened, with both core and headline PPI measures unexpectedly slipping in August.

Meanwhile, weekly jobless claims surged to 2,63,000, the highest level in nearly four years, adding to signs of labour market cooling. August’s non-farm payrolls showed a modest gain of just 22,000, falling well short of expectations for a 75,000 increase. While July’s figure was revised up slightly to 79,000, June's data was significantly lowered, underscoring the fragility in the labour market over the summer. This follows a substantial downward revision from the US Bureau of Labor Statistics, which slashed previously reported FY2025 job gains by a staggering 9,11,000, the largest benchmark revision on record, suggesting labor market weakness had already set in prior to Trump’s aggressive tariffs.

Amid mounting expectations of lower interest rates, US equities hit fresh record highs, while gold surged to a new all-time high of $3,715.2 per troy ounce on the COMEX and silver climbed above $43 per troy ounce for the first time in 14 years. Along with near certainty that the Fed will deliver a 25-basis-point rate cut at the September meeting, the CME FedWatch tool also showed traders pricing in two additional 25-bps cuts in October and December. Escalating geopolitical tensions, strong inflows into bullion-backed ETFs, and Trump’s ongoing efforts to influence the Fed further supported the rally in precious metals.

On the daily chart, MCX GOLD futures formed a Doji candlestick pattern last Friday, reflecting indecision among market participants. The price has been consolidating within the range of Rs 1,08,563 to Rs 1,09,840 per 10 grams for the past four sessions. While the short-term trend continues to signal a bullish bias, RSI (14) above 80 suggests that the price is in an overbought territory. A break and sustained move below Rs 1,08,500 could trigger a correction towards Rs 1,07,000. Conversely, a breakout above the immediate resistance at Rs 1,09,840 may extend the rally towards Rs 1,11,500.

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Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

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Base metals traded mixed on the LME, with the weaker dollar providing some support, while soft Chinese CPI data hinted at subdued domestic demand. Copper prices broke above the $10,000 per tonne mark for the first time in five months, buoyed by Freeport-McMoRan’s suspension of operations at the Grasberg mine in Indonesia, the world’s second-largest copper deposit.

Oil markets remained volatile, with WTI crude swinging between gains and losses before ending the week 1.2 percent higher. Prices briefly surged past $64 per barrel after Polish and NATO aircraft reportedly intercepted Russian drones, heightening concerns of new sanctions against Russia and the possibility of secondary sanctions targeting key buyers of Russian oil, including India and China. However, the rally was short-lived, as crude quickly retreated to $61.7 per barrel amid renewed oversupply concerns as the International Energy Agency (IEA) projected a significant supply surplus of 3.33 million barrels per day in 2025, citing planned output increases by OPEC+ members.

All eyes are now on Fed Chair Jerome Powell’s commentary following the September rate decision and the release of updated economic projections. With the September cut largely priced in, markets are focused on Powell’s tone and any forward-looking signals regarding the Fed’s stance through the remainder of 2025, especially in light of a persistent slowdown in labour demand.

Adding to the uncertainty, President Trump has requested that a federal appeals court pause a lower court ruling that blocked his attempt to remove Fed Governor Lisa Cook over allegations of mortgage fraud. He is seeking an emergency decision by Monday, just one day before the FOMC convenes. Meanwhile, if Trump’s Fed nominee Stephen Miran, a Treasury official, secures approval to join the Fed Board early next week, he may push for a more aggressive 50-basis-point rate cut, potentially shifting the balance within the policymaking committee.

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