Gold News: Can XAU/USD Rally Continue Despite Rising Profit-Taking Risks?

Gold Prices Climb as Rate Cuts and Geopolitical Tensions Support Bullish Outlook

Gold prices surged last week, supported by the U.S. Federal Reserve’s dovish monetary policy and heightened geopolitical tensions in the Middle East. The metal reached an all-time high of $2685.64 on Thursday before slightly pulling back to close at $2658.55, marking a 1.38% gain for the week. Expectations of further rate cuts and continued safe-haven demand helped sustain this bullish momentum despite some profit-taking.

Fed Rate Cuts and Economic Data Drive Gold Higher

A key driver of gold’s performance last week was the Federal Reserve’s decision to implement a larger-than-expected 50 basis point rate cut the previous week, bringing the benchmark rate down to 4.75%-5.00%. This move, aimed at cushioning the U.S. economy, boosted gold’s appeal as a non-yielding asset. With interest rates declining, the opportunity cost of holding gold diminishes, drawing in more investors.

Throughout the week, economic data releases further supported the case for continued rate cuts. The Personal Consumption Expenditures (PCE) price index—a critical measure of inflation—rose 0.1% month-over-month in August and 2.2% year-over-year, slightly below economists’ expectations of 2.3%. The core PCE index, which excludes food and energy, also rose by 0.1% for the month and 2.7% year-over-year, in line with forecasts​. These inflation readings reinforced the outlook that the Fed could cut rates again by the end of the year, as inflation remains close to the central bank’s 2% target.

Meanwhile, jobless claims fell more than expected, and durable goods orders remained flat, further indicating resilience in the U.S. economy despite the Fed’s aggressive rate cuts​.

Geopolitical Tensions Boost Safe-Haven Demand

In addition to the Fed’s actions, ongoing geopolitical tensions, particularly in the Middle East, provided strong support for gold prices. Conflict between Israel and Hezbollah escalated last week, with Israeli airstrikes in Lebanon further heightening risk sentiment. Investors seeking refuge from potential global instability increased their exposure to gold, pushing demand higher. Analysts expect these geopolitical risks to persist, keeping gold’s safe-haven appeal intact​​.

ETF Inflows and Central Bank Demand Support Gold’s Bullish Trend

Another key factor driving gold’s rally has been the return of inflows into gold-backed exchange-traded funds (ETFs)

. Global gold ETFs added 28.5 tonnes in August, led by North American investors. Central bank demand, particularly from China, also remains strong, with institutions continuing to accumulate the precious metal as part of their reserves. These factors have provided a robust foundation for the recent rally, and analysts expect further buying interest in the months ahead​​.

Gold’s Weekly Performance and Technical Outlook

For the week, gold’s high of $2685.64 marked the fourth consecutive session of record highs before closing at $2658.55, up $36.31 or 1.38%. The metal’s upward momentum has pushed prices significantly above key support levels, though some analysts are cautious about the potential for a near-term correction. Gold remains well above its 50-day moving average of $2499.04, and technical indicators suggest that the market may be overheated​.

However, any pullbacks are likely to be viewed as buying opportunities, especially with solid support at $2353.19 and expectations of further rate cuts. The main trend remains bullish, with no resistance at current levels. Analysts advise watching for a weekly closing price reversal as a potential signal of an impending correction​.

Gold Price Forecast: Continued Bullish Outlook

Looking ahead, the outlook for gold remains bullish in the near term. With the Federal Reserve expected to cut rates again and geopolitical risks continuing to drive demand, gold is likely to remain supported above $2600. Some volatility could occur if profit-taking accelerates, but the overall trend suggests further gains. Analysts project gold could test new highs of $2700 to $2850 in the coming months, particularly if inflation data softens further and the Fed continues its dovish stance​​.