Gold is powering higher again on Tuesday, pushing toward the key $3,700 level as investors continue to sell the US Dollar and position ahead of the Federal Reserve’s policy decision on Wednesday.
The rally builds on the metal’s record-breaking momentum, driven by a softening US Dollar, falling Treasury yields, and widespread expectations of a Fed rate cut.
Why Gold Is Surging
Gold (XAU/USD) is trading just under $3,700, gaining further traction as the US Dollar Index (DXY) drops to multi-week lows. With markets fully pricing in a 25 basis point Fed rate cut, the Dollar remains under pressure. At the same time, US Treasury yields are subdued, making non-yielding assets like gold more attractive.
With a rate cut almost fully priced in, all eyes are now on Fed Chair Jerome Powell’s press conference and the updated dot plot — which could provide crucial insights into how far and fast the central bank might go with further easing. A dovish tone could push gold higher, while a cautious or hawkish tilt may trigger a short-term pullback.
US Economic Data Could Sway Gold’s Momentum
Investors will also watch for key data on US Retail Sales and Industrial Production, both due later today. Weak retail figures would support the dovish narrative and may drive further gains for gold. However, stronger-than-expected data could test the rally.
- Retail Sales (MoM) are expected to rise 0.2% in August, slowing from 0.5% in July.
- Industrial Production is projected to decline by 0.1%, matching July’s contraction.
Fed Faces Political Pressure Ahead of Rate Decision
This week’s FOMC meeting isn’t just about the data. There’s also mounting political drama surrounding the Fed.
- President Trump has publicly pressured the Fed to cut rates more aggressively, posting on Truth Social that a bigger move is “long overdue” and would help the housing market.
- Fed Governor Lisa Cook will still participate in Wednesday’s meeting after a US appeals court blocked Trump’s attempt to remove her, ruling that the legal standard wasn’t met.
- Meanwhile, Stephen Miran, a former Trump economic advisor, was narrowly confirmed by the Senate and is expected to attend the meeting. Analysts believe he may push for a larger 50bps cut, raising concerns about potential political influence over the Fed’s independence.
Geopolitical Tensions Add Support for Gold
Beyond macroeconomic factors, geopolitical risks are adding to gold’s appeal as a safe-haven asset.
- Israel launched a major ground offensive in Gaza City on Tuesday, escalating its conflict with Hamas.
- Ukraine intensified its drone and missile attacks on Russian refineries, disrupting key energy infrastructure.
These developments are reinforcing investor demand for safe-haven assets like gold.
Technical Analysis: Bulls Eye $3,700 Breakout
Gold spent last week consolidating between $3,620 and $3,650, following a record high near $3,675 on September 9. Monday’s breakout above $3,650 put bulls firmly in control again.
- As of now, XAU/USD trades around $3,695, just below the $3,700 psychological barrier.
- Immediate support lies at the former high of $3,675, followed by the 21-period SMA near $3,652 on the 4-hour chart.
- If prices drop below those levels, the next downside target would be $3,620.
- On the upside, a clean break above $3,700 could open the door for a rally toward $3,730–$3,750.
The Relative Strength Index (RSI) is at 73, firmly in overbought territory. This indicates strong bullish momentum but also suggests the market could be vulnerable to short-term pullbacks or profit-taking.
The MACD also points to renewed upside strength. The MACD line has crossed above the signal line, with green histogram bars confirming bullish momentum after last week’s sideways price action.
Quick Take: Retail Sales – Why It Matters
The Retail Sales (MoM) report, released by the US Census Bureau, measures the total receipts of retail and food service firms. It’s one of the most-watched indicators for consumer spending, which makes up a large share of the US economy.
- A strong reading is generally seen as bullish for the US Dollar, as it suggests a healthier economy.
- A weak reading typically supports gold, as it may increase the chances of monetary easing by the Fed.
Bottom Line
With the Fed expected to deliver a rate cut and global tensions running high, gold remains firmly in the driver’s seat. As long as the Dollar stays weak and Treasury yields remain under pressure, the precious metal is well-positioned to break above $3,700 — and potentially push higher in the sessions ahead.