Gold (XAU/USD) steadied on Thursday after erasing some earlier losses, with softer US Dollar dynamics and lower Treasury yields lending support. The precious metal is trading around $3,636 per ounce, just below this week’s record high near $3,675, as traders weigh inflation data against expectations of Federal Reserve policy easing.
US inflation figures set the tone. The Consumer Price Index (CPI) rose 0.4% month-on-month in August, above the 0.3% forecast and higher than July’s 0.2%. On an annual basis, CPI climbed 2.9%, up from 2.7% previously. Core CPI, which excludes volatile food and energy prices, rose 0.3% monthly and 3.1% annually, matching expectations.
While inflation remains firm, broader US data continues to show weakness. Softer Producer Price Index readings, lackluster job growth, higher unemployment, and downward payroll revisions have reinforced the case for Fed rate cuts. Markets remain convinced the central bank will lower rates by 25 basis points next week, with the possibility of up to three cuts before year-end.
The US Dollar Index (DXY) reflected this sentiment, falling sharply to hover near 97.60. Treasury yields dropped across the board, with the 10-year dipping briefly below 4% and the 2-year sliding to 3.50%. Lower yields and a softer greenback boosted gold’s safe-haven appeal, limiting downside pressure.
Producer inflation data added to the dovish picture. Headline PPI fell 0.1% month-on-month in August versus forecasts for a 0.3% increase, while the annual rate slowed to 2.6% against expectations of 3.3%. Core PPI also slipped 0.1%, bringing its annual rate down to 2.8%.
Political developments have added a layer of uncertainty. The Senate Banking Committee narrowly approved Stephen Miran’s nomination to the Fed Board, advancing it to the full Senate. Miran is considered supportive of faster rate cuts, though his ties to the White House have raised concerns over Fed independence. Meanwhile, the Trump administration vowed to appeal a ruling blocking the dismissal of Fed Governor Lisa Cook.
Despite these headlines, market sentiment toward gold remains upbeat. Major global banks are raising forecasts. JP Morgan expects gold to average $3,675 in the fourth quarter and climb to $4,000 by mid-2026. Goldman Sachs projects prices could top $3,700 this year, with risks skewed higher. ANZ Bank recently raised its 2025 forecast to $3,800.
Labor market data reinforced the bullish view. Initial Jobless Claims rose to 263,000 last week, well above the 235,000 forecast, signaling further cooling in employment and adding pressure on the Fed to act.
From a technical perspective, gold is consolidating near support at $3,620 after slipping below the 21-period Simple Moving Average on the four-hour chart. Resistance lies at $3,634 and $3,650, with a break higher opening the door to retesting $3,675 and potentially pushing toward $3,700. On the downside, a break below $3,620 could bring the $3,600 level and the stronger $3,575 support into focus.
Overall, the gold prices outlook remains favorable. With inflation steady but growth softening, and rate cut expectations dominating sentiment, traders continue to see XAU/USD as a safe haven poised to benefit from the Fed’s next moves.
