Gold price forecast (XAU/USD) moved higher to approximately $2,665 during the early Asian trading session on Monday. A mix of escalating geopolitical conflicts and the growing possibility of a significant interest rate cut by the Federal Reserve (Fed) in November has positively impacted the value of this precious metal.
Geopolitical Tensions Elevate Gold’s Safe-Haven Appeal
Tensions in the Middle East, particularly Israel’s continued airstrikes on Hezbollah in Lebanon, have intensified. According to CNN, these attacks have led to over 100 casualties and more than 350 injuries. Additionally, the assassination of Hezbollah leader Hassan Nasrallah by Israel has further escalated the conflict along the Lebanese border. Such rising geopolitical uncertainties often encourage investors to flock to safer assets like gold, pushing its price higher.
US PCE Data and Fed’s Interest Rate Outlook
On Friday, the US Bureau of Economic Analysis (BEA) reported that the Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation, increased by 2.2% year-over-year in August. This was slightly lower than July’s 2.5% rise, signaling that inflationary pressures might be easing. The core PCE, which excludes volatile food and energy prices, rose 2.7%, aligning with market predictions. On a month-over-month basis, the index increased by just 0.1%.
The softer inflation figures have led to speculation that the Fed might implement another interest rate cut later this year. If the Fed does lower rates, it could make gold more attractive, as the precious metal does not yield interest, and lower rates reduce the opportunity cost of holding gold price forecast.
Chinese PMI Data: Another Key Indicator for Gold
Gold traders are keeping a close eye on upcoming economic data from China, particularly the Purchasing Managers Index (PMI) reports. The National Bureau of Statistics (NBS) is expected to release the Manufacturing PMI, which analysts predict will improve slightly to 49.5 in September from 49.1 in August. The Services PMI is also forecast to edge higher to 50.4 from 50.3 in the previous reading.
Weaker-than-expected Chinese data could put downward pressure on gold, as China is one of the largest gold consumers in the world. However, positive PMI data could reinforce gold’s safe-haven status and keep its price above $2,665.
Conclusion
In the short term, gold prices are likely to remain volatile, driven by geopolitical developments and global economic data. Traders will keep a close watch on upcoming Chinese PMI figures and any updates from the Federal Reserve regarding interest rate cuts.
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