Gold (XAU/USD) rose on Monday to a new record high of $3,685 an ounce, surpassing the previous peak of $3,674, and moving closer to the $3,700 mark as markets await this week’s Federal Reserve policy decision.

The precious metal continues to gain as traders price in an almost certain rate cut at the September meeting. The CME FedWatch tool shows a 95% probability of a 25-basis-point cut, versus just 5% odds of a larger 50-basis-point cut.

Technical outlook for gold:

Gold appears poised to test the $3,700 level in the near term, though the future path will depend on the outcome of the Fed meeting. If the decision is accompanied by dovish guidance, prices could break above this level and pave the way toward $3,750 and $3,800. However, if the Fed strikes a hawkish tone, profit-taking could emerge, pushing gold lower.

US stock indices rose on Monday as investors closely watched the upcoming Federal Reserve meeting.

Wall Street received support from comments by US President Donald Trump on Truth Social, saying that talks with the Chinese were going well, noting an agreement had been reached with Beijing regarding TikTok.

The Fed meeting will begin on Tuesday and conclude on Wednesday, with broad expectations for a 25-basis-point rate cut, amid Trump’s pressure to accelerate borrowing cost reductions.

According to the CME FedWatch tool, markets are pricing a 99.6% probability of a 25-basis-point cut, versus only 0.4% odds of leaving rates unchanged.

In trading, the Dow Jones Industrial Average was flat at 45,832 points as of 16:39 GMT, while the broader S&P 500 rose 0.5% (31 points) to 6,615. The Nasdaq Composite gained 0.8% (188 points) to 22,328.

Palladium prices fell during Monday’s trading despite a weaker US dollar against most major currencies, as renewed concerns over demand kept the industrial metal under pressure.

This comes amid the continued release of weak economic data from China. August figures showed that industrial production, retail sales, and fixed-asset investment all grew below expectations. The unemployment rate also rose unexpectedly to 5.3%.

These numbers followed last week’s soft inflation data, which confirmed persistent disinflationary pressures in the world’s second-largest economy, fueling further concerns about Chinese demand.

Separately, the ongoing Russia-Ukraine war continues to cast a shadow over markets, particularly metals, given that Moscow is one of the world’s largest palladium producers.

US President Donald Trump admitted on Monday that halting the Russia-Ukraine war is difficult under current conditions, noting that he was disappointed in President Vladimir Putin.

Dollar

The US Dollar Index fell 0.2% to 97.4 points by 16:03 GMT, after hitting a high of 97.7 and a low of 97.3.

Meanwhile, crypto markets are also awaiting the Federal Reserve’s decision this week, with markets pricing in a 99.6% probability of a 25 basis point rate cut, versus just 0.4% odds of keeping rates unchanged, according to CME FedWatch data.

Still, traders remain cautious about the long-term outlook for monetary easing, especially as the Fed has repeatedly warned about persistent inflation risks. Chair Jerome Powell has yet to commit to a clear path toward easing, despite mounting pressure from the White House to cut rates.

Palladium futures for December delivery dropped 3.2% to $1,210.5 an ounce by 16:04 GMT.

Bitcoin rose slightly on Monday, extending its recent gains amid growing conviction that the US Federal Reserve will cut interest rates this week.

However, most alternative cryptocurrencies declined, and emerging concerns about the long-term viability of large corporate investments in Bitcoin – which had been a major source of demand this year – limited its upside.

Bitcoin gained 0.7% to $116,527.3 by 02:01 ET (06:01 GMT), after rising about 5% last week.

Bitcoin supported by rate cut bets but caution remains

Bitcoin has recently seen a gradual recovery from the steep losses suffered between mid-August and early September.

Nevertheless, the token remains well below its August highs, weighed by profit-taking and rising doubts over the expansion of corporate treasury investments in digital assets.

These concerns intensified after Strategy (formerly MicroStrategy – NASDAQ: MSTR) was rejected for inclusion in the S&P 500, raising questions about the sustainability of the digital treasury model. Analysts at J.P. Morgan warned that the lack of further index inclusions undermines the long-term outlook for this investment approach.

This trend has left cryptocurrencies lagging behind the rally seen in other risk assets, particularly equities.

Focus on the Federal Reserve

Crypto markets are also awaiting this week’s Federal Reserve decision, with CME FedWatch data showing a 99.6% probability of a 25-basis-point rate cut, versus just 0.4% odds of no change.

Speculative assets like cryptocurrencies typically benefit from lower rates, as easier monetary policy boosts market liquidity.

Still, traders remain cautious about the longer-term path of monetary easing, with the Fed repeatedly warning of persistent inflation risks. Fed Chair Jerome Powell has yet to commit to a clear easing trajectory, despite mounting pressure from the White House to deliver cuts.