Gold Price Forecast: XAU/USD Rises to $3,365 as Rate Cut Expectations Build

Gold Price Forecast: XAU/USD Rises to $3,365 as Rate Cut Expectations Build

Gold prices (XAU/USD) have surged higher, reaching near $3,365 during the early Asian session on Thursday, marking a 0.25% rise on the day. The precious metal continues its bullish trend, gaining for the third consecutive day, as the U.S. Dollar loses ground due to softening inflation and jobs data, which have fueled growing expectations of a Federal Reserve rate cut in September.

Fed Rate Cut Expectations Boost Gold

U.S. inflation data has shown signs of moderation, with the July Consumer Price Index (CPI) coming in below expectations. This, along with weaker-than-expected non-farm payrolls data for July, has led investors to anticipate that the Fed will likely reduce interest rates later this month. Lower interest rates make non-yielding assets like gold more attractive by reducing the opportunity cost of holding the precious metal.

Market participants are now closely watching the release of the U.S. Producer Price Index (PPI) and weekly Initial Jobless Claims later today, which could offer further clues on the Fed's stance and provide additional support for gold prices.

The Dollar Weakens, Supporting Gold

As the U.S. Dollar weakens in anticipation of a rate cut, gold—which is priced in U.S. Dollars—benefits from its inverse relationship with the Greenback. Lower interest rates tend to decrease the appeal of the U.S. Dollar, making gold more attractive to investors looking for a hedge against inflation and economic uncertainty.

Trade Tensions May Impact Demand

However, some analysts caution that easing trade tensions, particularly between the U.S. and China, could reduce demand for gold as a safe-haven asset. If trade relations continue to improve, the need for gold as a risk-off investment may diminish, which could limit further upside potential.

In the meantime, gold's upward momentum is expected to continue in the near term, with XAU/USD potentially reaching higher levels if the Fed signals further rate cuts for the remainder of the year.