The gold price forecast (XAU/USD) has gained traction, hovering around $2,505 during Monday’s early Asian session, driven by growing expectations of a potential US Federal Reserve (Fed) rate cut in September. This week, gold traders will closely monitor the initial release of the US S&P Global Purchasing Managers Index (PMI) and a significant speech by Fed Chair Jerome Powell.
Last Friday, the precious metal surged to a new record high as market participants increased their bets on a possible interest rate reduction by the Fed in September. The recent US economic data revealed that while Retail Sales exceeded forecasts, both the US Producer and Consumer Price Indexes suggested a decline in inflationary pressures.
Moreover, US Housing Starts dropped by 6.8% in July, reaching 1.238 million units—a stark contrast to the 1.1% increase seen in June, marking the lowest level since 2020. This decline has amplified concerns regarding the robustness of the US economy, especially in light of recent softer inflation and labor market data. Consequently, expectations for more significant Fed rate cuts have strengthened, providing support to gold price forecast, as lower interest rates typically diminish the opportunity cost of holding non-yielding bullion.
Geopolitical tensions in the Middle East and the ongoing conflict in Ukraine continue to bolster safe-haven demand for gold. Over the weekend, the conflict between Hezbollah and Israel intensified, despite diplomatic efforts to ease tensions and avert a potential Hezbollah-Iran strike on Israel. According to the Guardian, an Israeli attack on Saturday resulted in one of the deadliest incidents for civilians since the hostilities began in October.
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