Gold Price Forecast: XAU/USD holds above $2,500 amid persistent geopolitical risks, hopes for Fed rate cuts

Silver

Gold

FXStreetAug 19, 2024 12:56 AM

Gold price drifts higher to $2,505 in Monday’s early Asian session.
The recent US Housing Starts added to concerns over the economy's strength and triggered the expectation of Fed rate cuts.
Escalating geopolitical tensions boosts the safe-haven asset like Gold.

Gold price (XAU/USD) gains momentum around $2,505 during the early Asian session on Monday amid hopes of the US Federal Reserve (Fed) rate cuts in September. Gold traders will take more cues from the first reading of the US S&P Global Purchasing Managers Index (PMI) and Fed Chair Jerome Powell's speech this week.

The precious metal rose to an all-time high on Friday as investors placed more bets on interest rate cuts from the US Fed in September. US economic data last week showed that Retail Sales beat estimates, but the US Producer and Consumer Price Indexes indicated inflation was subsiding.

Additionally, the US Housing Starts fell by 6.8% in July to 1.238 million units from the 1.1% increase in June, the lowest level since 2020. This figure added to concerns over the economy's strength, especially after recent softer inflation and labor reports. This, in turn, fuels deeper reductions by the Fed and underpins the yellow metal as lower interest rates generally reduce the opportunity cost of holding non-yielding bullion.

Federal Reserve Bank of Chicago President Austan Goolsbee said on Sunday that the US economy does not show signs of overheating, thus Fed policymakers should be cautious about keeping restrictive policy in place longer than necessary. The markets are now pricing in nearly 76% chance of a 25 basis points (bps) Fed rate cut in its September meeting, according to the CME FedWatch Tool.

The ongoing geopolitical tensions in the Middle East and the war in Ukraine all contribute to the safe-haven demand for gold. Conflict between Hezbollah and Israel has escalated over the weekend, despite diplomatic attempts to de-escalate tensions to prevent an expected Hezbollah-Iran strike on Israel, per the Guardian. The news agency reported that an Israeli attack on Saturday was one of the bloodiest for civilians since fighting began in October.

Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.