Gold(XAU/USD) short-term trend determination inflection point… Today's US economic indicators are a 'watershed'

Tuesday’s Asian trading session saw gold rise close to $4,305, maintaining the $4,300 level( reaching its highest since October 21). This trend reflects renewed bets on additional easing following the Federal Reserve(‘s third rate cut decision last week. However, the key factor now is whether today’s US non-farm payrolls (NFP) report, retail sales, and Purchasing Managers’ Index (PMI) will sustain this upward momentum or cause a sharp reversal.

Fed signals and market expectations, the gap as wide as a ‘baby step’

The Fed has left the door open for further rate cuts next year, but the official economic outlook) dot plot( remains conservative, reflecting only about one 25bp cut through the end of 2026.

In contrast, financial markets are moving much more aggressively. They are pricing in at least two or more additional rate cuts by year-end. The wider this gap, the more sensitive the gold market becomes to changes in interest rate expectations.

From an investment perspective, cautious positioning with a ‘baby step’ approach is crucial amid this uncertainty. It may be more effective to respond gradually to market signals rather than making large bets.

Today’s economic indicators will determine ‘gold prices’

The delayed US key economic data, postponed due to the federal government shutdown, will be released all at once on Tuesday. These data are critical in assessing whether “the economy is truly slowing.”

NFP (Non-Farm Payrolls): An indicator reaffirming labor market strength. If employment falls significantly short of expectations, the scenario of rate cuts will strengthen.

Retail Sales: A gauge for consumer spending weakness. If sales weaken, concerns about economic slowdown will rise, increasing safe-haven demand.

PMI: A manufacturing sentiment index that directly reflects business outlooks.

If all three indicators show weakness, the market is likely to interpret that the Fed needs to act more aggressively. This could lead to a sequence of rate cut bets → increased gold buying pressure → rising gold prices.

Conversely, if employment remains strong and consumption data are robust, the need for additional rate cuts may diminish, leading to a rebound in the dollar. In this case, short-term gains in gold could be partially corrected.

Geopolitical risks may fade like a ‘baby step’

The strength of gold as a safe-haven asset has been underpinned by concerns over Ukraine. However, if peace negotiations progress, this risk premium could diminish.

US officials recently mentioned that an agreement with Ukrainian President Zelensky is “nearly finalized.” Still, issues like territorial disputes and security guarantees from the US and Europe remain unresolved.

This indicates ongoing negotiations but no complete resolution yet. Such developments could temporarily cap gold prices. While risk sentiment hasn’t fully disappeared, risk aversion may gradually weaken.

Ultimately, gold’s direction today will likely depend on the upcoming US economic data and the progress of negotiations.