Forecast for Gold Prices: XAU/USD stays over $2,500 due to ongoing geopolitical concerns and expectations of Fed rate reductions

 

 

 

 

In anticipation of the US Federal Reserve (Fed) rate reduction in September, the gold price (XAU/USD) increased in value during Monday's early Asian session. The Fed Chair Jerome Powell's speech this week and the first reading of the US S&P Global Purchasing Managers Index (PMI) will be more important indicators for gold dealers. 
 

On Friday, the price of precious metal reached a record high as more traders gambled on the US Federal Reserve's September interest rate decreases. Although US Retail Sales exceeded forecasts, the US Producer and Consumer Price Indexes suggested that inflation was abating last week. 

 
Furthermore, from a 1.1% gain in June to 1.238 million units in July—the lowest level since 2020—the US Housing Starts decreased by 6.8%. This number increased doubts about the economy's health, particularly in light of recent labor and inflation data that were less optimistic. This in turn encourages the Fed to make more reductions and supports the yellow metal since storing non-yielding bullion has less of an opportunity cost when interest rates are lower. 

 
President of the Federal Reserve Bank of Chicago Austan Goolsbee said on Sunday that because there are no indications of an overheated US economy, Fed officials should exercise caution when extending restrictive measures beyond what is absolutely required. According to the CME FedWatch Tool, the markets are now pricing in a roughly 76% possibility of a 25 basis point (bps) rate drop by the Fed at its September meeting. 

 
The crisis in Ukraine and the continuing geopolitical unrest in the Middle East all support the demand for gold as a safe haven. Despite diplomatic efforts to defuse the situation and avert an anticipated Hezbollah-Iran assault on Israel, the conflict between Hezbollah and Israel intensified over the weekend, according to the Guardian. According to the news agency, since combat started in October, one of the worst Israeli attacks on civilians occurred on Saturday.