Geopolitics Support Gold Demand

Gold consolidates near $3,750 ahead of US PCE inflation data

Gold (XAU/USD) holds steady near $3,750 on Friday, consolidating within the familiar $3,760–$3,720 range after surging to a record high of $3,791 earlier this week. Traders are reassessing the Federal Reserve’s (Fed) monetary policy outlook amid mixed signals from officials and robust economic data from the United States.

Recent remarks from Fed policymakers have underscored the central bank's cautious approach to further easing, following last week’s 25-basis-point interest rate cut. While officials acknowledged rising risks to the labor market, they also flagged persistent price pressures and warned against moving too aggressively. This comes alongside resilient US economic data released on Thursday, including stronger-than-expected Gross Domestic Product (GDP) and Weekly Jobless Claims, complicating the Fed’s path toward additional cuts.

The precious metal’s muted price action reflects a cautious market mood, with participants reluctant to place fresh bets ahead of the core Personal Consumption Expenditures (PCE) Price Index due at 12:30 GMT. A hotter-than-expected reading could strengthen the case for a more measured pace of monetary policy easing, while a softer print may revive expectations for further rate cuts later this year.

Overnight, Gold drew some support as investors weighed fresh trade frictions following the United States President’s unveiling of a new round of sector-specific import tariffs. The renewed focus on trade frictions, combined with lingering geopolitical risks, reinforces Gold’s role as a safe-haven asset and helps keep it anchored near record highs.

Market movers: Markets eye PCE as tariffs and geopolitics stir uncertainty

• The core PCE Price Index, the Fed’s preferred inflation gauge, is expected to rise 0.2% MoM, down from a 0.3% increase in July. On an annual basis, the core index is forecast to hold steady at 2.9%.
• The headline PCE Price Index is expected to increase 0.3% MoM in August, up from 0.2% in July, while on a yearly basis it is projected to edge up to 2.7%, compared with the 2.6% advance seen in July.
• The United States President announced on Thursday that starting October 1, the country will impose a 100% tariff on branded or patented pharmaceutical products not made domestically, a 50% tariff on kitchen cabinets and bathroom vanities, a 30% tariff on upholstered furniture, and a 25% tariff on heavy trucks.
• Bloomberg reported that European diplomats have warned Moscow that NATO is ready to shoot down Russian planes if airspace violations continue. This comes as cross-border drone and jet incursions increase, with NATO members stepping up aerial surveillance and discussing a coordinated “drone wall” along the alliance’s eastern flank.
• Revised figures from the Bureau of Economic Analysis showed the United States 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 ahead of time, rather than wait for some giant catastrophe to occur.”

Technical analysis: XAU/USD consolidates near $3,750 as market awaits catalyst

From a technical perspective, XAU/USD remains in a holding pattern on the 4-hour chart. The metal is confined within a narrow range, with immediate support at $3,720, sitting just above a stronger base reinforced by the 50-period Simple Moving Average (SMA) around $3,712 and the $3,700 psychological level, where dip-buyers are likely to emerge.

A sustained break below $3,700 would shift the short-term bias lower, opening the door for a return to the previous consolidation zone, with next downside targets at $3,650 and $3,600.

On the upside, the first hurdle is the 21-period SMA near $3,754. A decisive move above this level would signal renewed bullish momentum and set the stage for a retest of the $3,780–$3,791 resistance area.

The Relative Strength Index (RSI) on the 4-hour chart is hovering near 56, indicating that momentum remains balanced for now, and Gold may continue to drift sideways until a clear directional breakout occurs.