Gold (XAU/USD) extended its rally in Monday’s Asian session, climbing to a fresh five-month high near $3,470 per ounce. The yellow metal regained momentum after last week’s brief pullback, fueled by renewed US Dollar weakness and growing expectations of a Federal Reserve interest rate cut in September.
Fed Rate Cut Expectations Boost Gold
The latest US inflation data reinforced market bets that the Fed will cut rates this month. Despite GDP and labor market figures showing resilience in the US economy, traders remain confident that the Fed will adopt a more dovish stance.
- US GDP (Q2): Grew at 3.3% annually, stronger than the 3.1% estimate.
- Jobless Claims: Fell to 229K, showing stability in the labor market.
- PCE Inflation (July): Remained elevated, but not enough to derail expectations of policy easing.
The CME FedWatch Tool now shows traders pricing in an 89% probability of a 25 basis point cut in September, compared to 85% before the PCE release. Lower borrowing costs traditionally support gold as they reduce the opportunity cost of holding the non-yielding metal.
Market Sentiment and Analyst Outlook
According to David Meger, Director of Metals Trading at High Ridge Futures, expectations of one or two Fed cuts this year are broadly supportive for commodities:
“We have expectations of a Fed rate cut, or potentially two, throughout this year, which is generally supportive for commodity prices across the board, including gold and silver.”
This sentiment highlights the increasingly bullish outlook for gold as investors continue to seek safe-haven assets amid global uncertainties and political turbulence in the US.
Technical Picture: Resistance and Support Levels
Gold’s rally has brought it close to major resistance near $3,470–$3,475, a zone that could determine whether the metal retests its record highs near $3,500.
- Immediate Support: $3,440 (short-term floor).
- Deeper Support: $3,400 psychological level, followed by $3,373.
- Key Resistance: $3,470 (current peak) and $3,500 (record high).
As long as gold remains above the 100-day EMA, its broader bullish structure remains intact, with the path of least resistance skewed higher.
Outlook for the Week Ahead
The focus now shifts to upcoming US macro data releases, including the July PCE inflation report and fresh labor market numbers. These will shape expectations for the September Fed meeting.
If data reinforces the dovish case, gold could stage a breakout above $3,500, opening the way toward new all-time highs. However, stronger-than-expected economic figures could spark a temporary US Dollar rebound, leading to short-term profit-taking in gold.
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