By Linh Tran, Market Analyst at XS.com
Gold is in a powerful uptrend and has set a record high near $3,648/oz, lifting year-to-date returns to around 45%, reflecting the confluence of falling U.S. Treasury yields, a weaker USD, and expectations that the Fed will cut rates soon. The accompanying macro backdrop also supports this positive trend as data indicate the U.S. economy is weakening. The U.S. labor market has recently cooled, with NFP rising by only 22K versus the 75K consensus, the unemployment rate at 4.3%, JOLTS at 7.18 million, while the manufacturing PMI at 48.7 shows a slower pace of contraction.
The upcoming “catalyst” is the U.S. CPI/PPI this week and the FOMC meeting on September 18, where the market leans toward a 25-basis-point cut—indeed, discussion of 50 basis points has also emerged. If inflation comes in “softer,” the easing narrative will be reinforced: real yields would continue to cool and the USD would weaken—creating a favorable environment for gold. Conversely, “hot” data could push yields and the USD higher, potentially triggering a technical correction in gold before the primary trend is reassessed.
Flows are a key pillar when assessing the medium- and long-term trend for gold. Western funds continued to lead inflows into gold in August. Notably, U.S. low-cost gold ETFs—typically held by long-term strategic investors—are having their best year on record, reflecting both positive expectations and concerns about “stagflation” risk.
On the derivatives side, money managers’ net long position on COMEX is around 525 tonnes, with a total net of about 760 tonnes, while ETF options have surged (according to the World Gold Council, GLD +$4.3 billion net delta-adjusted and IGLN +$74 million) and options on futures have also boomed (according to the World Gold Council, GCA +$7.3 billion and AUAA +$659 million). Current developments indicate rising hedging demand.
The White House has just issued an executive order clarifying how gold bullion imports are treated on a country-by-country basis within the tariff framework—a step that enhances supply-chain transparency and reduces trade-policy noise for physical gold flows.
In the short term, this week’s market action will revolve around the U.S. CPI/PPI data and expectations ahead of the September 18 FOMC meeting. A “soft” inflation outcome would support the case for the Fed to cut 25 bps, pulling down real yields and the USD, thereby maintaining gold’s high base and opening room for new highs. Conversely, “hot” data could trigger a necessary technical correction, especially given that money managers’ net long positioning on COMEX is already elevated.
In the medium term, gold’s primary trend tilts positive if a genuine monetary-easing cycle takes shape; in that scenario, a lower-rate environment combined with a weaker USD will continue to support the metal. In terms of flow structure, Western funds are leading inflows into gold and U.S. low-cost gold ETFs are having their best year on record, reflecting both optimistic expectations and concerns about stagflation. The geopolitical backdrop (the Middle East, maritime risks, trade/tariff policy) remains an indirect variable via inflation expectations. If tensions re-escalate, gold’s role as a safe haven may be overweighted.
Overall, the medium-term reversal risks lie mainly in the possibility of persistent inflation keeping real yields elevated or ETF inflows stalling. Conversely, if CPI/PPI cool sustainably, the Fed moves toward easing, and ETFs continue to attract capital, gold has a basis to maintain a high base and extend the recently established highs.