Gold Market: Fed Officials Send Dovish Signals, Gold Prices Rally Sharply, Awaiting Non‑Farm Payrolls

On Thursday, September 3 local time, Fed Governor Waller delivered a dovish speech, which became the primary trigger for the latest gold rally. Waller stated that if forthcoming inflation data confirms sustained cooling, he would support holding interest rates steady at the September policy meeting and sees no need for further rate hikes.

Following these remarks, market‑priced odds of a September Fed rate hike fell sharply from 63% to around 50%. U.S. Treasury yields and the U.S. Dollar Index declined simultaneously, lowering the holding cost for non‑interest‑bearing gold and driving a steep advance in bullion.

Market Performance: Spot gold surged nearly $85 during Thursday’s U.S. session with a maximum gain of roughly 2%, hitting a one‑week high of $4510 per ounce and closing near $4472/oz. COMEX gold futures also climbed above $4520 per ounce. During Friday’s Asian hours, gold traded at elevated levels between $4475‑4480 per ounce and is on track for a modest weekly gain.

Market Focus: Global traders are closely watching tonight’s U.S. Non‑Farm Payrolls report, alongside U.S. CPI inflation figures due next week. The strength of employment data will shape the Fed’s September rate decision. Weak payrolls would further scale back rate‑hike expectations and benefit gold; stronger‑than‑expected jobs data could revive hawkish bets and place downward pressure on bullion prices.

Institutional Views: Gold is currently pulled by two opposing forces. On one hand, shifting Fed policy expectations support valuation recovery. On the other hand, higher crude oil prices stemming from Middle‑East tensions rekindle inflation fears and cap gold’s upside. In the medium‑to‑long term, persistent central‑bank gold purchases underpin price floors. However, a major sustained trend will only materialize once the Fed clearly signals rate cuts.

Crude Oil Market: US‑Iran Tensions Escalate, Supply Risks Surge; Oil Posts Strongest Weekly Gain Since Mid‑July

Geopolitical risks in the Middle‑East flared up again. On Thursday, Iran carried out missile and drone strikes against U.S. military bases located in Kuwait and the United Arab Emirates, reigniting US‑Iran confrontation. Fears over potential blockage of the Strait of Hormuz shipping lanes pushed up global crude‑oil supply‑disruption risk and boosted oil’s risk premium.

Price Performance: Brent crude traded at $95.67 per barrel and WTI crude at $91.56 per barrel. Both notched substantial weekly advances: Brent rose 7.1% and WTI gained nearly 9.8%, marking the largest weekly increase since the week of July 20. After sharp intraday gains, profit‑taking emerged, paring back some of the advances.

Other Key Market Developments:

1. Saudi Arabia released its official selling prices for October crude, lowering price quotations for cargoes destined for Asia and Europe. This suggested supply tightness is less severe than market panic implied, limiting further oil price spikes.
2. Markets are also pricing in prospects for Russia‑Ukraine peace talks. Progress toward a cease‑fire could rapidly erase geopolitical risk premiums and trigger oil price declines.
3. Domestic U.S. petroleum product prices advanced alongside crude oil, with diesel hitting a cyclical high. Renewed inflation concerns have emerged, creating countervailing effects on the Federal Reserve’s monetary‑policy calculus.

Outlook: Near‑term crude oil remains dominated by Middle‑East developments. Further conflict escalation could send oil prices higher. Conversely, if hostilities remain limited to retaliatory strikes without strait blockage, combined with potential OPEC+ policy adjustments, meaningful downside correction from current highs cannot be ruled out. Going forward, U.S. non‑farm payrolls, U.S. crude‑inventory reports and real‑time Middle‑East developments will act as core price drivers.

Gold‑Crude Correlation Dynamics

Gold and crude oil are showing a typical divergence. Crude oil is directly driven by geopolitical shocks, while gold moves mainly on Fed interest‑rate expectations. Elevated oil prices lift inflation expectations and constrain room for Fed monetary easing, acting as a headwind for gold gains. Investors need to monitor both geopolitical and macroeconomic threads going forward.