On Monday, spot gold slumped by nearly 2% at one point, mainly because expectations for a Federal Reserve rate cut in December cooled further, triggering a strong rebound in the US Dollar Index. As the dollar strengthened, dollar-denominated gold immediately became more expensive for holders of other currencies, causing buying interest to shrink sharply. With rate-cut expectations being heavily revised down, the earlier optimism around gold is fading fast.
In the space of just one week, the market’s implied probability of a 25-basis-point rate cut by the Fed in December has dropped from over 60% to below 40%.
Several Fed officials have taken a clearly hawkish tone. Vice Chair Jefferson stressed that any further rate cuts should proceed slowly. Governor Waller, while still supporting a December cut, emphasized that this would be a risk-management move rather than a signal that the economy has deteriorated to the point where aggressive easing is needed.
Markets are also worried that the backlog of delayed data set to be released this week—especially the September nonfarm payrolls—may not be as weak as previously expected. A stronger-than-expected report would give the Fed more reason to stay on hold. Because of the earlier US government shutdown, a large amount of economic data was postponed and will now be released in a compressed window this week, with Thursday’s September nonfarm payrolls report likely to become the key focus for all markets.
J.P. Morgan forecasts that only 50,000 jobs were added in September, which would leave a sliver of hope for a December rate cut. However, Goldman Sachs warns that this data is already seriously lagged and of limited reference value, making it unlikely to resolve the debate over the outlook.
In addition, the White House has already signaled that the October jobs report will not include the unemployment rate, and that October CPI will also be withheld. Data quality in the coming months will be heavily compromised, significantly increasing the difficulty of the Fed’s decision-making.
Even so, Goldman Sachs reiterates its year-end 2026 gold target of USD 4,900—or even higher. Its core thesis is that central banks will continue large-scale gold purchases, while private investors keep increasing gold allocations for diversification. Gold prices have already surged about 55% this year.
Market Commentary:
The core driver of the gold rally has never been rate cuts alone. In the short term, if this week’s September nonfarm payrolls data surprises to the upside, gold prices may test the USD 3,900–3,950 support zone.
But from a medium- to long-term perspective, three strategic tailwinds continue to underpin a structural bull market in gold:
the long-term trend of central bank gold buying,
the persistence of geopolitical conflicts, and
the downward drift in real interest rates.
Together, these three forces still support a long-term bullish outlook for gold prices.
