Gold Rally Nears $3,800: Can Weak Labor Data Provide the Next Push?
Gold prices are once again flirting with record highs, moving within striking distance of $3,800 an ounce. Despite momentum indicators suggesting the metal is overheated, analysts argue that the fundamentals supporting the rally remain too strong to ignore.
Gold’s Relentless Momentum
For the fifth week in a row, gold has ended on a record-setting note. Spot gold closed Friday at $3,775.69 per ounce, nearly 2.5% higher than the previous week. The latest surge comes even as markets recognize that gold’s current pace is unusually stretched.
Yet, analysts remain optimistic. Chris Mancini, co-Portfolio Manager of GOLDX at Gabelli Funds, noted:
“I think gold prices can continue to go higher as the world looks for an alternative to the U.S. dollar.”
Inflation Data Keeps Fed in Play
The bullish tone was reinforced by the U.S. Commerce Department’s release of the core Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation measure. The data showed inflation steady at 2.9% year-over-year, a figure above the Fed’s target but not high enough to derail policy easing.
Aaron Hill of FP Markets suggested the Fed has flexibility to cut rates further, predicting reductions of at least 50 basis points before year-end.
Central Banks and ETFs Fuel the Fire
Beyond monetary policy, gold’s strength is also being bolstered by large-scale institutional demand. UBS and ANZ see central banks acquiring more than 900 tons of gold in 2025, while ETF inflows continue to expand.
Hill highlighted this demand as the critical driver:
“Gold has the firepower to smash past $3,800 … expect a quick surge, not endless consolidation, as bulls reload.”
Markets Eye Rate Cuts and Employment Data
According to the CME FedWatch Tool, traders are pricing in an 87% chance of a rate cut next month and a 65% chance of another cut in December. But employment data may hold the key to whether gold breaks decisively above $3,800.
Barbara Lambrecht of Commerzbank explained that gold may need “a new spark” to break higher, with a disappointing U.S. labor market report being one potential trigger. However, she cautioned that economists currently expect slight improvement in employment figures.
Risk of a Pause: Consolidation Ahead?
Analysts are not unanimous on gold’s ability to climb further without a cooldown. David Morrison at Trade Nation observed that although gold nearly reached $3,800 this week, overbought metrics such as the daily MACD suggest that a consolidation or correction could be necessary before the next rally.
He added:
“Gold looks likely to make fresh record highs before it finally tops out. But the likelihood is that it will need a significant correction first.”
The outlook for gold remains overwhelmingly bullish, supported by central bank buying, speculative inflows, and a softer Federal Reserve stance. However, near-term progress may depend heavily on labor market data. A weak employment report could give gold the push it needs to firmly establish itself above $3,800, while stronger figures may force the rally to cool off before resuming.
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