Gold rebounds above $4,450 as Waller tempers Fed rate hike bets ahead US jobs data

Gold price (XAU/USD) gains momentum to around $4,470 during the early Asian session on Friday. The precious metal extended its recovery as Federal Reserve (Fed) rate hike bets ease. All eyes will be on the US August Nonfarm Payrolls (NFP) report, which is due later on Friday.

Earlier this week, hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium drove expectations of a US September rate hike higher and weighed on the yellow metal. However, traders subsequently pared back their bets on further monetary tightening after Fed Governor Christopher Waller said he expects “reasonable” inflation readings next month.

Traders of Fed funds futures see a 50.2% chance of a quarter-point hike in September, down from 63.2% before Waller‘s speech, according to the CME’s FedWatch tool.

“With the Fed currently offering no forward guidance, gold remains highly sensitive to shifts in market expectations for the September meeting,” said Saxo Bank Head of Commodity Strategy Ole Hansen.

Traders will closely monitor the US jobs data for August later on Friday, which could offer fresh cues on the US interest rate path. The Nonfarm Payrolls (NFP) is expected to show a 56,000 job addition in August, while Unemployment Rate is projected to hold steady at 4.1% during the same period. If the report shows stronger-than-expected outcomes, this could lift the US Dollar (USD) and drag the USD-denominated commodity price lower.

Fed Governor Waller delivered a moderately hawkish but data-contingent message, with the FXS Speechtracker score at 6.1 slightly softer relative to the historical average of 6.3. The key remark that Waller is inclined to support holding rates steady in September if August inflation shows continued progress, but would consider a hike if the data comes in hot, underscores a live-meeting, reaction-function focus that limits immediate repricing in the Dollar while preserving upside risk. Emphasis on emerging disinflation, solid GDP and a satisfactory labor market, alongside acknowledgment of upside inflation risks, keeps the tone cautiously hawkish rather than aggressively so.

The FXS Fed Sentiment Index fell by 2.06 points to 125.38, signaling a modest pullback in perceived hawkishness despite remaining firmly above the neutral 100 mark. This combination of a lower index reading and a still-elevated level indicates that, while Wallers data-dependent stance has cooled some expectations compared to the established baseline, the overall policy tone remains in hawkish territory according to both the FXS Fed Sentiment Index and the FXS Speechtracker.

Analysts at HSBC argue that a further US rate increase is unlikely in the near term, provided that “high energy prices aren‘t translating into higher core inflation.” They note that this “remains our base scenario,” stressing that the Fed will be reluctant to tighten policy further because “the US Federal Reserve won’t want low-income households to bear the pressure of higher rates.”

In the daily chart, XAU/USD holds a constructive near-term bias as it remains above the 100-day simple moving average (SMA) and the Bollinger Bands middle line, suggesting underlying demand after the latest pullback. The Relative Strength Index (RSI) at 55.34 sits in neutral-to-positive territory, hinting that bullish momentum has cooled from overbought readings but still favors mild upside rather than a deeper correction.

On the topside, immediate resistance is located at the Bollinger Bands upper band near $4,675, where any advance would likely meet profit-taking and volatility expansion. On the downside, initial support is seen at the Bollinger middle band at $4,460, followed by the 100-day SMA at $4,360, while a deeper decline could test the lower Bollinger band around $4,245.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold has played a key role in human‘s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a countrys solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.