Gold’s relentless march toward new highs defined the week: spot prices hovered near $3,650/oz, only a shade beneath April’s record $3,673.95. A weak U.S. labour market and another hot inflation report forced markets to bake in aggressive rate-cut expectations. Economists polled by Reuters now see a 90 % probability of a 25-bp Federal Reserve cut at the 16–17 September FOMC meeting and even assign a 10 % chance of a larger 50-bp cut. Weak economic data – U.S. consumer prices rising 0.4 % in August (higher than expected), producer prices actually contracting, and initial jobless claims surging to 263k – amplified bets that policymakers will ease. As a result, major U.S. stock indices hit fresh records and gold rallied more than 39 % year-to-date. Oil, meanwhile, slipped about 2 % as OPEC+ signalled more supply and global demand concerns grew.
Macro Drivers and Key Events This Week
- Federal Reserve (16–17 September) – FOMC meeting with updated economic projections and dot plot. Market base case: a 25-bp cut; futures price nearly three cuts by year-end. Advance Retail Sales Report (16 Sept) will test U.S. consumption resilience.
- Bank of Canada (17 September) – Expected hold at 2.75 %. With inflation near target and flat GDP, the BoC can wait.
- Bank of England (18 September) – Widely expected to hold at 4.0 %. Labour and CPI data (16–17 Sept) will be pivotal; soft prints could open the door to a November cut.
- Bank of Japan (19 September) – No change expected at 0.50 %, but 55 % of economists see a hike in Q4. Forward guidance on YCC and inflation in focus.
- China Data (16 September) – August industrial production and retail sales. Weakness would reinforce concerns on global commodity demand.
- Energy and Commodities – OPEC+ planning supply hikes; IEA/OPEC monthly reports key. Base metals sensitive to Chinese prints and U.S. tariffs on EV imports.
Gold (XAU/USD)
- Primary Case – Bullish Bias: The aggregated models lean bullish, with the dominant signal driven by Fed easing expectations and soft global data. Institutional flows (central-bank + ETF inflows) continue to underpin gold. Price action bias: test/retest of $3,650–$3,700 range.
- Alternative Case – Neutral Consolidation: Models assign a secondary cluster to sideways trade if the Fed cuts 25 bp in line with consensus. Compression between $3,550–$3,650 likely until a fresh catalyst emerges.
- Tail Case – Bearish Pressure: The least-likely but high-impact scenario involves a hawkish Fed message combined with upside data surprises. In that environment, yields back up and gold could mean-revert toward $3,450.
U.S. Dollar Index (DXY)
- Primary Case – Bearish Tilt: Aggregation shows the dollar’s downside skew is heavier, with risk-on FX demand and potential for a dovish Fed surprise. Weak consumption data amplifies this tilt. Expected zone: 101.5–102.0.
- Neutral Case – Range-Bound: If Powell threads the needle with a single 25 bp cut and balanced tone, the dollar consolidates between 102–103.
- Upside Tail – Bullish Dollar: A hawkish Fed or strong retail sales surprise could break the skew, driving the DXY back above 103.
Crude Oil (Brent)
- Base Case – Bearish Setup: Most models cluster around further downside pressure from OPEC+ supply additions and fragile Chinese demand. Implied path: drift toward $60.
- Neutral Case – Balanced Range: If supply ramps meet modest demand recovery, Brent stabilises in the $64–$68 corridor.
- Bullish Tail: Only a significant exogenous shock (geopolitical or weather-related) breaks the downside skew, opening upside toward $72.
Volatility Regime and Session Dynamics
- Volatility Regime – Compression in gold near highs, but event risk (FOMC, retail sales) sets up breakout potential. Equity vols elevated after tariff headlines; vol curves imply 1.25–1.5 % one-day S&P swings.
- Asia Session (Tokyo/Sydney) – Typically range-bound. China’s data (16 Sept) could jolt metals and AUD/JPY.
- London Session – Liquidity heavy; UK labour/CPI and BoE decision will drive GBP and gilt moves. Euro/dollar sensitive to Fed surprises.
- New York Session – Retail sales and Fed meeting both land here; highest volatility during London–NY overlap (12:30–16:00 GMT).
Key Takeaways
- Policy Week – All Eyes on the Fed: 25-bp cut expected, but 50-bp surprise remains a tail risk. Powell’s presser and dot plot will dictate forward curves.
- Divergent Central Bank Paths: Fed easing vs. BoC/BoE holds and BoJ’s gradual tightening path. Expect widened yield differentials.
- Commodities at a Crossroads: Gold near records in compression regime; crude pressured by supply hikes and weak demand. China data is the swing factor.
