Gold price tops $3,800/ounce but US labor data needs to weaken

After a series of strong increases since the breakout last month, world gold ended the fifth consecutive week at a record high, approaching the 3,800 USD/ounce mark. Spot gold prices closed at $3,778.1 an ounce, up nearly 2.5% from last week.

Although momentum indicators show that gold has been overbought, many experts say it is difficult to ignore the increase based on solid fundamentals. I think gold prices could continue to rise as the world looks for an alternative to the US dollar, said Chris Mancini, co-chair of the GOLDX fund at Gabelli Funds.

The gold market ended the week near a session high after the US Commerce Department announced the core personal consumption expenditure (PCE) price index - the Fed's preferred inflation measure, excluding food and energy prices - at 2.9% compared to the same period last year.

Although inflation remains above the US Federal Reserve's (FED) target, economic experts say this level is still manageable, as US consumers and the US economy continue to be stable.

Aaron Hill - head of analysis at FP Markets (Australia) - said that the FED has enough room to cut interest rates by at least 0.5 percentage points by the end of the year.

Gold has enough strength to break through $3,800 thanks to central bank purchases (expected to exceed 900 tons in 2025) and capital flows into ETFs.

UBS and ANZ also target gold prices at the end of 2025 at this level in the context of many geopolitical fluctuations. It could be a quick breakthrough, not a long accumulation period, he said.

According to the CME FedWatch tool, the market predicts an 87% chance of the Fed cutting interest rates next month and a 65% chance of continuing to cut in December.

Fawad Razaqzada - an analyst at City Index and FOREX.com, said that only when expectations of interest rates change significantly can the increase of gold.

If next weeks data sharply reduce December rate cut expectations, the US dollar could strengthen and hold back gold. Conversely, if data is weak, gold will be supported. In general, unless there are major fluctuations, the current factors will still help gold soon surpass the $3,800/ounce mark, he said.

Experts say gold and the US dollar will be particularly sensitive to upcoming US jobs data. Any further signs of weakness in the US labor market will strengthen expectations of a rate cut, thereby supporting gold prices.

Barbara Lambrecht - commodity analyst at Commerzbank - commented that the market may need a new "fire" to push prices above $3,800, for example, a US jobs report disappointed for the third consecutive time. However, she predicted that the US labor market may improve slightly.

Although optimism is dominant, some experts advise investors to be cautious at the current price.

David Morrison - senior analyst at Trade Nation - warned: "The yesterday MacD index is still too much to buy. Gold may need to adjust deeper or move sideways for a while to accumulate more momentum before reaching a new peak. However, I believe gold will soon hit a new record before creating a long-term peak.