- Gold breaks out above $3,760 and advances toward the recent ATH of $3,791.
- Fresh US tariffs and geopolitical tensions keep safe-haven demand for Gold underpinned.
- The core PCE Price Index rose 0.2% MoM and headline PCE rose 0.3% MoM in August, up from 0.2% in July.
Gold (XAU/USD) extends gains on Friday, pushing past the recent $3,760-$3,720 range, as the US Dollar (USD) eases after the latest Personal Consumption Expenditures (PCE) inflation report showed no fresh upside surprises.
At the time of writing, XAU/USD is consolidating around $3,780, hovering just below the all-time high of $3,791 set earlier this week. The metal is on track for its sixth straight weekly gain, supported by safe-haven demand amid renewed trade tensions and geopolitical risks.
The core PCE Price Index, the Federal Reserve’s (Fed) preferred gauge of underlying inflation, rose 0.2% MoM, matching forecasts and down from July’s originally reported 0.3%, which was revised lower to 0.2%. On an annual basis, the core measure held steady at 2.9%, underscoring that inflation is easing but still above the Fed’s 2% target.
The headline PCE Price Index rose 0.3% on the month, matching expectations and up from 0.2% in July, while the annual rate ticked up to 2.7% in August from 2.6% a month earlier.
Recent remarks from Fed policymakers have underscored the central bank’s cautious approach to further easing, after last week’s 25-basis-point interest rate cut. While officials have acknowledged rising risks to the labor market, they also flagged persistent price pressure and warned against moving too aggressively. This comes together with a string of resilient US economic data released on Thursday, including stronger-than-expected Gross Domestic Product (GDP) and Weekly Jobless Claims, which complicate the Fed’s path toward additional cuts.
Market movers: Markets eye PCE as tariffs and geopolitics stir uncertainty
- The University of Michigan Consumer Sentiment Index slipped to 55.1 in September from 55.4 in August, while the Consumer Expectations Index edged down to 51.7 from 51.8. The survey’s 1-year inflation expectation eased slightly to 4.7% from 4.8%, and the 5-year inflation expectation declined to 3.7% from 3.9%
- President Donald Trump announced on Thursday that starting October 1, the US will impose a 100% tariff on any branded or patented pharmaceutical product not made in America, a 50% tariff on kitchen cabinets and bathroom vanities, a 30% tariff on upholstered furniture, and a 25% tariff on heavy trucks made outside the US.
- Bloomberg reported that European diplomats have warned Moscow that NATO is ready to shoot down Russian planes if airspace violations continue. The warning comes as cross-border drone and jet incursions increase with NATO members, including Turkey, stepping up aerial surveillance and European defense leaders discussing a coordinated “drone wall” along the alliance’s eastern flank.
- Revised figures from the Bureau of Economic Analysis showed the US economy expanded at a 3.8% annualized pace in Q2, up from the previously estimated 3.3%. The core PCE price index within GDP ticked higher to 2.6% from 2.5%, signaling persistent price pressures. The Census Bureau reported that Durable Goods Orders for August rebounded by 2.9%. Meanwhile, the Labor Department reported that Weekly Initial Jobless Claims fell to 218,000 from 232,000 the previous week.
- The stronger-than-expected data prompted markets to scale back expectations for another Fed rate cut in October, with CME FedWatch data showing the implied probability slipping to 87% from 94% prior to the release.
- Several Federal Reserve officials struck contrasting notes on Thursday, highlighting the policy debate within the central bank. Chicago Fed President Austan Goolsbee sounded cautious about the pace of easing, saying he was “a little uneasy with too much front-loading” of rate cuts. Kansas City Fed President Jeffrey Schmid leaned hawkish, stressing that “inflation remains too high while the labor market, though cooling, still remains largely in balance.”
- On the other side of the spectrum, Fed Vice Chair for Supervision Michelle Bowman was more dovish, noting that recent data suggest “we have a more fragile labour market than we were expecting to see.” Meanwhile, Governor Stephen Miran, who dissented in favor of a larger 50-basis-point cut at last week’s meeting, argued that “I would rather act proactively and lower rates as a result ahead of time, rather than wait for some giant catastrophe to occur.”
Technical analysis: XAU/USD nears $3,791 as bulls regain upper hand
From a technical perspective, XAU/USD has broken above its recent consolidation phase on the 4-hour chart, extending gains toward the $3,791 record high. The former range top at $3,760 now acts as immediate support, backed by a stronger base around $3,720, reinforced by the 21-period Simple Moving Average (SMA) near $3,755.
A sustained break below $3,750 would shift the short-term bias lower, opening the door for a return to the previous consolidation zone, with next downside targets at $3,720 and $3,700.
On the upside, a clear move above the $3,780-$3,791 resistance area would signal renewed bullish momentum and could pave the way for a fresh push into uncharted territory.
The Relative Strength Index (RSI) on the 4-hour chart has firmed to around 66, reflecting strengthening bullish momentum after the breakout.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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