Gold’s Momentum and Macroeconomic Catalysts: Positioning Ahead of the U.S. Nonfarm Payrolls Report

The gold market is poised at a critical juncture as it approaches the release of the U.S. nonfarm payrolls (NFP) report, a key driver of macroeconomic sentiment and currency dynamics. With commercial hedgers and large speculators having significantly increased their net-long positions in gold—reflecting heightened bullish sentiment—the metal’s trajectory will likely hinge on how market participants interpret the NFP data and its implications for Federal Reserve policy [5]. This analysis explores the interplay between positioning, macroeconomic catalysts, and central bank activity to assess gold’s momentum ahead of the report.

Market Positioning: A Bullish Foundation

The latest CFTC Commitments of Traders (COT) report underscores a robust buildup of long positions in gold, with commercial hedgers and large speculators maintaining net-long exposure despite recent volatility [5]. This positioning suggests a growing conviction in gold’s role as a hedge against economic and geopolitical uncertainties, particularly as the market anticipates a potential Fed rate cut in September. The COT report is a critical barometer for gauging risk appetite, and the current data indicates that traders are hedging against scenarios where a weak labor market or geopolitical tensions could drive demand for safe-haven assets [3].

NFP and Gold: A Complex Inverse Relationship

Historically, gold has exhibited an inverse correlation with U.S. nonfarm payrolls data. Stronger-than-expected NFP figures typically bolster the U.S. dollar, which exerts downward pressure on gold prices due to the metal’s lack of yield [1]. Conversely, disappointing reports often trigger a flight to gold as investors seek refuge from a weakening dollar and potential rate cuts. For instance, the market’s expectation of a 75,000-job increase in August 2025—a sign of a cooling labor market—has already pushed gold toward record highs, with traders pricing in a near 100% probability of a 25-basis-point Fed cut [2]. However, this inverse relationship tends to weaken four hours after the NFP release, as investors adjust positions or lock in profits, highlighting the need for caution in extrapolating short-term moves [1].

Central Bank Buying: A Structural Tailwind

Central banks remain a cornerstone of gold’s macroeconomic support. In August 2025, global central banks added 10 tonnes of gold to their reserves, with key contributors including Kazakhstan (3 tonnes), Turkey (2 tonnes), and China (2 tonnes) [5]. This trend reflects a broader strategic shift away from dollar-based assets, driven by concerns over U.S. fiscal sustainability and geopolitical risks. The World Gold Council’s 2025 survey reveals that 95% of central banks expect their gold reserves to grow over the next 12 months, with diversification and inflation hedging as primary motivators [1]. China’s nine-month gold-buying streak, which has added 36 tonnes since June 2024, exemplifies this trend, as does Uganda’s pilot program to build domestic gold reserves [5].

Interplay of Catalysts: NFP, Fed Policy, and Central Bank Demand

The upcoming NFP report will not only influence the dollar’s strength but also shape expectations for Fed policy—a critical determinant of gold’s opportunity cost. A weaker-than-expected report could accelerate rate-cut expectations, further boosting gold’s appeal as a non-yielding asset. Conversely, a stronger report might delay cuts, temporarily dampening gold’s momentum. However, central bank demand provides a structural floor for prices, as institutions continue to prioritize gold for its diversification benefits and safe-haven status [4]. Goldman Sachs has projected gold prices to reach $3,700 by year-end and $4,000 by mid-2026, assuming sustained central bank buying and a shift in private investor sentiment away from dollar assets [2].

Conclusion: A Tenuous Balance Ahead

Gold’s momentum ahead of the NFP report reflects a delicate balance between short-term volatility and long-term structural trends. While positioning data and central bank activity provide a bullish foundation, the market’s reaction to the NFP will hinge on how investors reconcile immediate economic signals with broader macroeconomic narratives. Traders should monitor not only the headline NFP figure but also components like wage growth and labor force participation, which can override headline data in shaping gold’s trajectory [1]. As the Fed’s policy path remains a wildcard, gold’s role as a hedge against uncertainty—whether economic, geopolitical, or monetary—ensures its relevance in a rapidly evolving landscape.

Source:
[1] US August Nonfarm Payrolls Preview: Analyzing Gold price reaction to NFP surprises [https://www.fxstreet.com/analysis/us-august-nonfarm-payrolls-preview-analyzing-gold-price-reaction-to-nfp-surprises-202509041000]
[2] Goldman Sachs sees gold prices surpassing 4000 if [https://m.fastbull.com/news-detail/goldman-sachs-sees-gold-prices-surpassing-4000-if-4342492_0]
[3] Gold Futures Archives [https://www.cannontrading.com/tools/support-resistance-levels/category/gold-futures/]
[4] Gold Mid-Year Outlook 2025 [https://www.gold.org/goldhub/research/gold-mid-year-outlook-2025]
[5] Central Bank Gold Buying Slowed in August [https://www.moneymetals.com/news/2025/09/04/central-bank-gold-buying-slowed-in-august-004315?srsltid=AfmBOooe96W6XD0FU7tNdCUYNt-1eSA9Bl559aeZ5KcjBSZ0eZPQuJmk]