NFP Shock Fuels Fed Cut Bets and Gold Surge

Key Takeaways:

*Gold held above $3,590/oz after August’s shock NFP miss, with weaker labor data cementing Fed cut bets and undermining the dollar’s yield advantage.

*Political interference in U.S. institutions and eroding Fed independence raise risks of a Treasury-to-gold rotation, with upside toward $3,800/oz.

*The dollar remains fragile as yields collapse and policy credibility is questioned, leaving upcoming payroll revisions as the next decisive test.

Market Summary:

The U.S. Dollar Index (DXY) remained under heavy pressure as investors digested the shockingly weak August Nonfarm Payrolls report. Just 22,000 jobs were created versus the 75,000 forecast, with negative revisions erasing prior gains and the unemployment rate climbing to 4.3%, the highest in four years. The data cemented expectations for a September 25bps cut, with markets also pricing a small chance of a 50bps “jumbo” move. Treasury yields tumbled on the release, undermining the dollar’s yield premium and leaving the greenback vulnerable ahead of Tuesday’s payroll benchmark revisions, which could reveal even weaker job creation over the past year.

Gold held near historic highs above $3,590/oz, consolidating after its latest surge driven by the NFP shock. The collapse in real yields and dollar weakness provided the immediate catalyst, but deeper structural supports are amplifying the rally. Central banks, most notably the People’s Bank of China—continue to diversify reserves, marking ten straight months of gold accumulation in August. At the same time, geopolitical tensions, including Trump’s threat of new sanctions on Russia and political uncertainty in Japan, have reinforced safe-haven flows.

Investor confidence in U.S. institutions is another tailwind for bullion. Analysts at Goldman Sachs warn that continued erosion of Fed independence could prompt a shift out of Treasuries and into gold, with even a small reallocation by reserve managers potentially driving prices toward $5,000/oz. ETF inflows of $5.5 billion in August highlight strong institutional demand, offsetting softer physical buying from Asia where record-high prices have curbed retail appetite.

Looking ahead, the dollar’s near-term path hinges on the benchmark payroll revisions and incoming inflation data, but the bias remains to the downside amid aggressive Fed repricing and political uncertainty. For gold, the path of least resistance remains higher, with $3,677/oz seen as the next technical target should macro and structural tailwinds persist.

Technical Analysis

DXY, H4: 

The Dollar Index (DXY) has rebounded from the 97.65 support area, recovering modestly after a sharp retreat from the 98.75 region. Price is now consolidating below the cluster of resistance at 98.10, leaving the index in a pivotal zone where direction could be decided in the coming sessions. A clear break above 98.10 would open the way for a retest of 98.75, while sustained rejection risks renewed downside toward 97.65 and 97.10.

Momentum signals remain mixed. The RSI stands at 48, recovering from oversold conditions but still shy of a bullish confirmation. The MACD remains slightly negative, though the histogram is narrowing, suggesting downside momentum is fading and stabilization may be underway.

Overall, DXY remains vulnerable below 98.10, with downside risks lingering toward 97.65. However, a decisive push through resistance would shift momentum back in favor of bulls, exposing higher targets at 98.75 and potentially 99.60 if buying pressure accelerates.

Resistance level: 98.10, 98.75

Support level: 97.65, 97.10

GOLD, H4: 

Gold extended its rally, climbing above $3,588 after reclaiming the $3,550 breakout zone, with prices now pressing against the $3,615 resistance area. The advance builds on sustained bullish momentum that has carried the metal steadily higher in recent sessions, reinforcing its underlying constructive structure. Price is now testing resistance at $3,615, with a sustained move higher exposing the next key target at $3,677. On the downside, immediate support rests at $3,555, followed by stronger footing at $3,530 and $3,495 should buyers falter.

Yet, momentum gauges are starting to reflect signs of moderation. The Relative Strength Index is holding near 69, just shy of overbought territory, indicating that while buyers remain in control, the pace of gains may be vulnerable to near-term consolidation. At the same time, the MACD remains firmly positive, though its histogram has begun to flatten, suggesting a possible easing in upside momentum even as the broader bias stays constructive.

Resistance level: 3615.00, 3677.00

Support level: 3550.00, 3495.00