Gold at $3,684 Eyes Breakout Past $3,707 as Fed Cuts Spark Bullion Surge

Gold (XAU/USD) Nears $3,707 Record While Fed Cuts Drive Fifth Weekly Gain

Gold prices ended the week at $3,684.98 after briefly touching an all-time high of $3,707.56 on September 17. That marks the fifth consecutive weekly advance for bullion, translating into nearly 40% year-to-date gains and reinforcing gold’s role as the best performing major asset of 2025. The surge comes as the Federal Reserve delivered its first 25-basis-point rate cut since 2024, lowering the policy range to 4.00%–4.25%. Futures markets now price in at least two additional cuts before year-end, keeping gold structurally supported despite profit-taking midweek.

Federal Reserve Policy Shift Creates Ideal Backdrop for Gold

The September rate decision underscored a dovish tilt that benefits non-yielding assets. Chair Jerome Powell highlighted “risk management” flexibility, while Minneapolis Fed President Neel Kashkari signaled more cuts are likely. The macro setting is defined by sticky inflation, with July core PCE at 2.9% year over year, the highest since February. Lower real yields remain gold’s strongest catalyst, with 10-year Treasuries steady at 4.13% and 30-year yields at 4.74%, both near five-month lows. Reduced opportunity costs and elevated fiscal risks ensure the policy backdrop remains one of the most bullish in decades for gold.

XAU/USD Technical Setup Points to $3,800 and Above

The technical structure shows consolidation beneath record resistance at $3,707.56, with short-term support at $3,660–$3,627. A clean breakout could open the path toward $3,800, then $3,879.64, with extended upside targets near $3,900 and $4,000 if momentum accelerates. The 50-day moving average at $3,436.02 acts as the major trend anchor, while a break under $3,627 could drag prices toward $3,511–$3,500. Overbought conditions remain evident, with RSI cooling to 75 after peaking at 81, yet the broader trend favors continued strength as long as $3,600 holds.

Physical Market Signals Diverge Between India and China

India’s physical premiums rose to a ten-month high despite bullion near record territory, supported by festival season demand and retail conviction. In contrast, Chinese discounts widened to a five-year peak, reflecting price-sensitive buying behavior. This divergence highlights regional differences but underscores gold’s global resilience. Central banks remain net buyers, while ETF holdings show renewed accumulation. The combined effect of institutional and retail flows continues to underpin support at elevated levels, keeping corrections shallow even amid profit-taking phases.

Macro Forces Reinforce Gold’s Safe-Haven Bid

Tariffs and inflation risks add layers of demand. U.S. retail sales in August surprised to the upside, yet weakening labor data suggests the consumer backdrop is fragile. The Fed’s easing cycle directly reduces holding costs, while fiscal stress and geopolitical tensions increase hedging flows. Citi upgraded its three-month gold forecast to $3,800, while Deutsche Bank expects averages around $4,000 given sustained central bank purchases and investor positioning. Historical parallels with prior easing cycles suggest upside momentum can extend far beyond current levels, particularly if the U.S. economy edges closer to a hard landing.

Mining Equities Capitalize on Bullion’s Surge: Focus on Gold Fields (GFI)

Gold miners are translating record bullion prices into extraordinary cash generation. Gold Fields (NYSE:GFI) delivered a 24% year-on-year production increase in H1 2025, while lowering all-in sustaining costs by 4%. Free cash flow soared to $1.14 billion on realized prices of $3,089 per ounce, lifting operating cash flows to $1.3 billion. Shares have surged nearly 57% year-to-date to $41.32, broadly in line with valuation models estimating equity value at $41.37 per share. With production guidance between 2.25–2.45 million ounces for 2025 and capex of $1.52 billion, the group remains well-positioned, though analysts argue the stock is fairly valued relative to peers. The sector’s upside remains more tightly tied to bullion’s trajectory than to individual company performance.

Liquidity and Treasury Dynamics Could Define the Next Breakout

The U.S. Treasury General Account currently stands at $807 billion, with market expectations that once it clears $850 billion, liquidity will release back into risk assets. Arthur Hayes and other market veterans argue this inflection point could trigger an “up-only” phase across equities and commodities, including gold. If combined with further Fed cuts and sticky inflation, the probability of XAU/USD breaking above $3,707 materially increases, with acceleration toward $3,800–$4,000. However, dollar rebounds or deeper profit-taking could temporarily cap advances, making $3,627 and $3,511 key supports to monitor in the coming sessions.

That's TradingNEWS