Today’s market analysis on behalf of Ahmad Assiri Research Strategist at Pepperstone
The previous session lacked notable momentum in equities or bonds as the US observed Labor Day but all eyes turned to gold. The yellow metal surged past $3,500 per ounce retesting its historic peak earlier in the year.
This move is not a random anomaly, it rather reflects the confluence of resurging inflation concerns, growing conviction that the Fed soon to resume its easing cycle, and heightened anticipation ahead of Friday’s US nonfarm payrolls report. In this sense, gold has become a barometer of market unease and uncertainty across inflation, monetary policy and employment.
With Wall Street closed, attention shifted to Europe and Asia. The Stoxx 600 posted modest gains while the FTSE remained soft. In Asia, the standout story was Alibaba, whose Hong Kong-listed shares jumped nearly 18% on robust cloud and AI revenues, lifting the Hang Seng almost 2%. By contrast, Japan’s Nikkei slid more than 1% as investors locked in profits after a strong recent run. The takeaway is that investors become more selective, rewarding clarity or earnings surprises, while broader flows remain cautious ahead of US jobs data.
In fixed income, Treasuries were muted by the holiday, with the 10-year closing last week near 4.23%, slightly lower. Friday’s payrolls release looms large, soft data could accelerate the push toward lower yields and bolster gold further, while stronger prints may temper the move but are unlikely to erode gold’s role as a structural hedge.
The dollar index stayed below 98, near its weakest in weeks, as markets priced further Fed cuts amid thin US liquidity. The euro traded sideways, largely shrugging off France’s political noise. Overall, low flows characterized FX markets, with the spotlight fixed firmly on US data later in the week.
Gold, Why $3,500 Matters
The breakout above $3,500 reflects a renewed spotlight on inflation, with US data showing pressures in services and energy that undermine the disinflation to 2% target narrative and suggest the Fed may temporarily tolerate stronger inflation. It also reflects growing market conviction that the Fed’s easing cycle is near, with more than an 80% probability priced for a September cut and further easing expected by year-end. Lower real yields strengthen the appeal of non-yielding assets like gold. At the same time, the upcoming payrolls release represents a potential inflection point, weak data could cement the easing path and drive fresh flows into gold, while strong figures may slow but not reverse the momentum. Overlaying all of this are geopolitical and policy uncertainties, from US tariff debates to questions about Fed independence, which are reinforcing demand for the yellow metal. Importantly, this rally does not appear purely speculative. Macro funds, retail investors and perhaps some central banks are participating, lending depth and durability to the move.
Political noise is present. A US court struck Trump tariffs, injecting renewed uncertainty into trade dynamics. In the UK, the Labour government’s reshuffle pressured gilts and lent further support to gold.
The clearest signal from markets is that gold has become the compass. Equities are resilient but lack conviction, bonds are waiting on payrolls and currencies are drifting on the dollar’s softness. Gold alone has surged to a new realm as the ‘chosen’ asset embodying the search for certainty amid looming macro events.