Gold (XAUUSD) Price Forecast: Gold Breakout Looms If Fed Delivers Dovish Surprise
News Summary
Gold (XAU/USD) prices consolidated below a key pivot at $3643.76 on Monday, as the market awaits direction from the Federal Reserve's upcoming rate decision. Traders largely anticipate a 25 basis point rate cut, but uncertainty surrounding Fed Chair Jerome Powell's post-meeting tone—whether dovish or cautious—is restraining speculative positioning in gold. Recent economic data complicates the Fed's position, with August CPI rising to 2.9% YoY and core inflation at 3.1%, both above the 2% target, while weekly jobless claims increased to their highest since October 2021, signaling labor market softness. The article suggests gold will remain range-bound around $3643.76 until the Fed provides clarity, with a hawkish stance potentially capping gains and a dovish tilt opening the path for a retest of $3674.70 and higher.
Background
The market is currently focused on the Federal Reserve's monetary policy trajectory, particularly within the re-elected Trump administration's tenure in 2025, amidst fluctuating inflation and employment data. The Fed faces a dilemma between persistent inflation (CPI and core CPI both above the 2% target) and a softening labor market (rising jobless claims). Gold, a traditional safe-haven asset, is highly sensitive to interest rate expectations, with lower rates typically boosting its appeal by reducing the opportunity cost of holding the non-yielding asset. The current environment of expected rate cuts, coupled with economic uncertainty, sets the stage for potential volatility in gold prices based on the Fed's forward guidance.
In-Depth AI Insights
Is the downside risk for gold being underestimated, even with an anticipated Fed rate cut? - While a 25 basis point rate cut is largely priced in, the degree of Powell's dovishness is crucial. If his tone is merely neutral-dovish rather than strongly dovish, and inflation persistently remains above target, the Fed might signal a slower pace of future cuts, potentially capping gold's upside. - President Trump's