Speculators are increasing their long positions, retail investors are boosting their ETF holdings, and central banks are adding to their gold reserves. Against this backdrop, buying the dip is becoming the best strategy for XAU/USD. The NFP report may provide an opportunity to put this strategy into action. Let’s discuss this topic and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- The precious metal is sensitive to market confidence in the Fed.
- Central banks continue to buy gold.
- Asset managers are increasing their long positions in gold.
- Weak NFP data would provide an opportunity to add to XAU/USD purchases.
Fundamental Forecast for Gold Today
Appearances can be deceiving. At first glance, gold’s roller-coaster ride following Kevin Warsh’s Jackson Hole speech was driven by changes in the odds of a Fed rate hike in September, which jumped from less than 40% to 70% before falling to 50%. Treasury yields followed a similar trajectory. However, according to UBS research, XAU/USD‘s sensitivity to bond yields has declined significantly in recent years due to strong central bank demand for bullion. In reality, the underlying reason goes even deeper.
The more unconventional the president, the greater the risk of fiscal dominance — a situation in which monetary policy serves the government’s interests rather than the goal of bringing inflation back to target. The White House has made no secret of its preference for lower interest rates. Treasury Secretary Scott Bessent has outlined reasons why the Fed should cut rates. Vice President JD Vance has pointed to inflation dynamics as evidence that the central bank should pursue monetary easing.
Gold and Dollar Performance
Source: Bloomberg
Against this backdrop, Kevin Warsh’s Jackson Hole speech should be assessed in terms of its impact on market confidence in the Fed’s independence. Had the Fed chair struck a dovish tone, concerns about fiscal dominance could have sent the US dollar tumbling, boosted interest in decentralized financial assets, and fueled demand for the debasement trade. However, Warsh refrained from taking a dovish stance. His hawkish rhetoric not only surprised the markets but also restored confidence in the Fed’s independence, triggering a wave of XAU/USD selling.
The markets then remembered that the Federal Reserve is not a one-man show. Neutral comments from other FOMC officials, including influential policymakers such as John Williams and Christopher Waller, brought the odds of monetary policy tightening in September back to roughly 50/50. This breathed new life into gold.
Gold Prices and ETF Holdings
Source: Bloomberg
Almost the entire market is now supporting gold. Asset managers have increased their net long positions to their highest levels of 2026, ETF holdings are rising even as prices decline, and central banks continue to buy bullion. In July, central banks added another 23 tonnes of gold to their reserves, with China and Poland leading the purchases.
According to UBS research, since Western countries froze part of Russia’s foreign exchange reserves in 2022, emerging-market central banks have increased the share of gold in their portfolios from 5–7% to 11%. This remains well below the 26% recorded in developed markets, suggesting there is still room for further growth. The same may be true for the precious metal itself.
Gold’s Share in Central Bank Reserves
Source: Financial Times.
XAU/USD Trading Plan for Today
In my view, gold’s long-term outlook remains bullish. Therefore, weak NFP data would provide an opportunity to add to long positions opened at $4,415 per ounce, while strong figures would offer a chance to buy the dip in the precious metal.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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