Gold Price Forecast: XAU/USD Eyes $3,800 Breakout With Fed Cuts on Horizon

Gold (XAU/USD) Trades Near Record Highs as Fed Cut Bets Intensify

Gold held its ground near all-time highs this week, with spot XAU/USD closing around $3,648.55 per ounce, just shy of the $3,673.95 peak hit on Tuesday. U.S. gold futures for December delivery ended at $3,686.40, highlighting the metal’s resilience in the face of mixed data. For the week, gold gained roughly 1.7%, extending its year-to-date surge to nearly 39–40% and locking in a fourth straight weekly advance. The rally is supported by expectations that the Federal Reserve will deliver its first rate cut of the year at the September 17 meeting, with futures markets fully pricing in a 25 bps move and reduced probability of a larger 50 bps cut.

Labor Market Weakness Reinforces Bullish Case for Gold

The strongest catalyst this week came from the labor market. Initial jobless claims spiked to 263,000, the highest in four years, while revisions erased 911,000 jobs from the past year’s data. Combined with softer payroll growth, these figures have convinced traders that the Fed has little room to delay easing. Despite August CPI showing a 0.4% monthly rise—hotter than the 0.3% estimate—investors are focusing on weakening employment over sticky inflation. Real yields have dropped more than 20 basis points in a month, with the U.S. terminal rate now at 2.93%, providing further tailwinds for bullion.

Gold Supported Above $3,600 With Breakout Levels in Sight

Technically, gold has defended the $3,612 intraday low and remains supported above the $3,593 midpoint of its current trading band. Analysts highlight $3,674.70 as the key breakout level to confirm new highs, while a strong support cluster sits between $3,500 and $3,493. UBS revised its year-end forecast upward to $3,800/oz for 2025, with a $3,900/oz projection by mid-2026. The bank also expects ETF holdings to climb near 3,900 metric tons, supported by 700 metric tons of fresh inflows next year.

ETF Inflows and Central Bank Purchases Tighten Supply

Gold ETFs saw renewed buying momentum this week, reversing outflows and strengthening institutional positioning. UBS highlighted that ETF flows are now tracking correlations that justify a $200/oz price revision upward into 2026. Central banks remain active: purchases are projected at 900–950 metric tons in 2025, slightly below last year’s record of 1,000+ tons but still historically strong. In Asia, the People’s Bank of China has sought feedback on proposals to ease licensing rules for gold imports and exports, potentially opening the door to greater demand from the world’s largest consumer.

Political Pressure Adds Fuel to Gold Rally

Political factors are amplifying safe-haven flows. Reports suggest U.S. President Donald Trump is pushing aggressively for lower policy rates and even seeking ways to influence the Fed, including moves against Governor Lisa Cook. Traders see political intervention as an additional driver for gold, reinforcing its role as a hedge against institutional uncertainty. On the global front, tensions around Russian oil sanctions and tariff risks are adding layers of demand for defensive assets, with gold being the clear beneficiary.

Silver, Platinum, and Palladium Join the Precious Metals Surge

The rally has not been limited to gold. Silver climbed 1.7% to $42.26/oz, its highest level in 14 years, marking a 48% gain year-to-date. The gold-silver ratio now sits around 85, well above its historical average of 50–60, signaling that silver may be undervalued relative to gold. Platinum rose 1.2% to $1,395.05, and palladium advanced 1.3% to $1,202.93, with all three metals set for weekly gains. Analysts note silver’s dual role—precious metal and industrial input in solar and EV manufacturing—gives it added upside potential.

Industry Developments Reflect Gold’s High-Price Environment

High spot levels are driving strategic shifts among miners. Barrick Gold Corporation (NYSE:GOLD) agreed to sell its last Canadian gold mine for up to $1.1 billion, aiming to recycle capital, fortify its balance sheet, and boost shareholder returns. The transaction underscores how elevated prices above $3,600/oz are giving producers room to monetize non-core assets while maintaining leverage to the ongoing bull market. Insider transaction data in the sector has shown consistent hedging and profit-taking, but institutional flows remain net positive into mining equities, aligning with gold’s fundamental strength.

Macro Context and Outlook Into Year-End

With the Dollar Index (DXY) stable at 97.54, gold’s strength this week reflects investor preference for bullion as a hedge against U.S. monetary shifts and weakening labor data. Markets are pricing not only September’s rate cut but also the potential for two more cuts by year-end, which would further entrench gold’s appeal. Year-to-date, gold has outperformed nearly every asset class, up 38–40%, and remains on pace to breach UBS’s revised $3,800 target if easing accelerates.

Gold’s consolidation above $3,600/oz despite record highs points to a market preparing for the next breakout. With ETF inflows reviving, central banks stockpiling nearly 950 tons, silver and platinum confirming momentum, and labor market deterioration forcing the Fed’s hand, the risk-reward remains skewed to the upside.

Based on the alignment of macro, technical, and institutional drivers, the current setup supports a Buy rating for XAU/USD, with the next test at $3,674–$3,690, and a medium-term upside target at $3,800–$3,900 if the Fed validates market expectations next week.

That's TradingNEWS