Major revision of U.S. employment data strengthens interest rate cut expectations, gold prices briefly surpassed $3,670 to reach a new high

According to Zhitong Finance APP, gold prices reached a historic high on Tuesday as traders' assessments of U.S. economic data further strengthened expectations for a Federal Reserve interest rate cut. Gold prices briefly surpassed $3,674 per ounce during the session, and although they later retreated to around $3,643, they remained at elevated levels.

The direct trigger for the surge in gold prices was the U.S. Department of Labor's preliminary revision of employment data, which indicated that the previously reported number of jobs may have been overestimated by 910,000. This record revision heightened concerns in the market about a slowdown in the U.S. labor market.

The Federal Reserve will hold a monetary policy meeting next week, and the U.S. Producer Price Index and Consumer Price Index, which will be released on Wednesday and Thursday, respectively, will be key data influencing the Fed's decision-making.

Geopolitical risks also supported the upward movement of gold prices. U.S. President Trump indicated to European officials that if the EU cooperates, the U.S. is willing to impose new tariffs on India and China to compel Russia to participate in negotiations regarding the Russia-Ukraine conflict. Additionally, Israel conducted a rare military strike against senior Hamas leaders in Doha, escalating tensions in the Middle East. Multiple geopolitical conflicts have driven safe-haven demand, further pushing up gold prices.

Moreover, the Trump administration has attempted to expand its influence over the Federal Reserve, challenging its independence. However, recent judicial rulings have temporarily blocked attempts to remove Federal Reserve Governor Lisa Cook, ensuring that she can continue to serve and participate in next week's Federal Open Market Committee meeting, which supports the continuity of Fed policy.

Since the beginning of this year, global central banks have maintained strong enthusiasm for gold purchases. This week, the Czech National Bank announced that its gold reserves reached a historic high, while the People's Bank of China (central bank) also reported an increase in gold reserves, and the Reserve Bank of India has similarly expanded its gold purchases. Due to ongoing central bank gold purchases, rising geopolitical uncertainties, and concerns about the potential impact of U.S. tariff policies on the global economy, gold prices have accumulated an increase of nearly 40%.

In addition, inflows into gold ETFs have also supported gold prices. Several institutions, including Goldman Sachs, predict that as expectations for a Federal Reserve interest rate cut strengthen, gold prices still have room to rise.

Analysts Sonny Kumari and Daniel Hynes from ANZ Bank noted in their latest report that rising risks in the labor market may prompt the Federal Reserve to maintain an accommodative policy until March 2026.

The bank has raised its year-end gold price target by $200 to $3,800 per ounce and expects that gold holdings in major markets such as China and India will continue to grow, with gold ETF investments expected to increase by 200 tons for the remainder of 2025.

Are gold and silver prices rising too quickly in a short period?

According to long-term trend line analysis, current gold prices seem to be in the "expensive" range. Silver has also deviated from long-term trends, but to a lesser extent. For example, based on the linear trend from the beginning of the 21st century, current gold prices are 42% above the trend line (equivalent to $1,550 per ounce); even when using an exponential trend line, they are still 30% above the trend value (equivalent to $1,100 per ounce).

For investors who believe in "mean reversion," the current price trends of gold and silver may indeed raise concerns, as they have to anticipate a downward correction in prices. But in this context, is the assumption of mean reversion valid?

Long-term trends should not be easily dismissed due to temporary price deviations (which often delight investors). However, in specific environments, long-term trends may indeed fail—especially in the gold and silver markets. These two metals not only have industrial demand but also serve a "quasi-currency" function, trading in the market in a manner akin to currency. Particularly during times of pressure on the global fiat currency system, gold (and to a lesser extent, silver) is viewed by many investors as a "safe haven."

The current motivations for investors turning to gold and silver are clear: ongoing expectations of central bank interest rate cuts, increasing tensions in the international economic and financial system, and rising doubts about the creditworthiness of multiple governments. These factors have shaken confidence in the reliability of fiat currencies, reduced the attractiveness of bond investments, and driven up demand for gold and silver, especially in the context of a low likelihood of improvement in global financial conditions.

In this context, holding gold and silver remains reasonable for investors, even if current prices are significantly above the long-term trend line.

In terms of market dynamics, as of the time of writing, spot gold is up 0.5% to $3,643.44 per ounce; the U.S. dollar index is flat after a slight increase the previous day, silver prices have surpassed $41 per ounce, and palladium and platinum prices have also risen in tandem