Gold hits fresh record at $3,646 as Fed rate cut bets strengthen

• XAU/USD surges after the August jobs report shows just 22K new positions and rising unemployment to 4.3%.
• Fed is expected to cut 25 bps in September, though some speculation lingers for a larger 50 bps easing move.
• Traders eye US PPI and CPI data this week, with disinflation likely cementing the case for policy easing.

Gold's rally extended for the second straight day on Monday, reaching a new record high of $3,646 as growing confidence that the Federal Reserve (Fed) will reduce rates at the September meeting increased. Therefore, XAU/USD trades at $3,634, up by more than 1%.

Bullion jumps over 1% as weak US jobs data fuels full pricing of September rate cut

Weakness in the labor market in the United States prompted investors to fully price in a 25-basis point (bp) rate cut by the Fed. An anemic print of 22K jobs created in August, coupled with an uptick in Unemployment Rate from 4.2% to 4.3%, bolstered Gold's appeal to the detriment of the US Dollar.

Other data showed that business activity in the services sector expanded after the Institute for Supply Management (ISM) Services PMI grew at its fastest pace in six months.

It is worth noting that some speculation exists that the Fed will resume its easing cycle with a 50-bps cut at the September meeting.

Traders' eyes are set on the upcoming inflation figures in the US. The Producer Price Index (PPI) is awaited on Wednesday, ahead of the Consumer Price Index (CPI) on Thursday. If prices continued to resume their downward trend, the cut would be cemented. Otherwise, it could catch traders off guard and trigger a Dollar recovery.

Daily digest market movers: Gold rallies as traders wait for US inflation data

• Gold price is underpinned by broad US Dollar weakness. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is down 0.21% at 97.50.
• US Treasury yields are falling, with the 10-year Treasury note down over three basis points (bps) to 4.049%. US real yields--calculated by subtracting inflation expectations from the nominal yield--have decreased nearly three basis points to 1.679% at the time of writing.
• Inflation figures in the US will be released during the week. On Wednesday, traders await the US PPI, which is expected to remain unchanged at 3.3% YoY. Core PPI is foreseen to dip from 3.7% to 3.5%.
• On Thursday, CPI is projected to rise from 2.7% to 2.9% YoY. The Core CPI, which excludes volatile items, is foreseen to remain unchanged at 3.1% YoY.
• Physical demand for the precious metal is also a tailwind for Bullion prices, which are up 38% since the beginning of the year.
• Chinese official data revealed that the People's Bank of China (PBoC) extended its buying streak to 10 straight months in August.

Technical outlook: Gold price poised to challenge $3,700 in the near term

The Gold uptrend resumed on Monday, with traders pushing XAU/USD above the $3,600 mark, which paves the path to challenge $3,700. Bullish momentum had accelerated, confirmed by the Relative Strength Index (RSI), which, despite being overbought, remains shy of the most extreme readings above the 80 level. Hence, further upside is projected until the RSI pierces back down to the 80 level, which could confirm that a peak is near.

If XAU/USD clears $3,650, the next stops would be $3,700, $3,750 and $3,800. Otherwise, the first support would be the September 8 low of $3,578 ahead of $3,550. Down lies the $3,500 figure as buyers next line of defense.