Gold News: Could Upcoming PCE Inflation Data Push Gold to New Highs?

Fed Cuts and Geopolitical Risks Propel Gold to Record Highs

Gold prices hit an all-time high of $2,625.79 this week, buoyed by U.S. Federal Reserve rate cuts, geopolitical risks, and a weakening U.S. dollar. The metal settled 1.69% higher for the week, marking a continuation of its strong performance in 2024. The Federal Reserve’s surprise 50-basis-point rate cut was a major driver, lowering U.S. interest rates to 4.75%-5%. This action, along with the dovish outlook for further cuts by year-end, bolstered the appeal of gold, as it thrives in low-rate environments​​.

Last week, XAU/USD settled at $2622.24, up $43.52 or +1.69%.

Fed Rate Cut Spurs Gold Rally

The Fed’s aggressive 50-basis-point cut reignited bullish sentiment for gold. Traders had largely anticipated a 25-basis-point reduction, but the larger cut shifted expectations, leading to renewed demand for safe-haven assets. In addition, markets now expect another rate cut in November, which could provide further support for gold as lower rates reduce the opportunity cost of holding non-yielding assets like bullion​​.

The U.S. dollar’s continued weakening—driven by expectations of ongoing rate cuts—added to gold’s appeal for international investors, as it becomes cheaper for holders of other currencies​​.

Geopolitical Tensions and Central Bank Demand Bolster Gold

Gold’s performance was further supported by rising geopolitical tensions, particularly in the Middle East. Hezbollah’s threats of retaliation against Israel, following recent clashes in Lebanon, kept markets on edge, driving investors toward safe-haven assets.

With conflicts in Gaza and Ukraine still unresolved, gold continues to serve as a hedge against global uncertainties​​. In addition, demand from central banks and ETFs continues to grow, further tightening physical supply and adding upward pressure on prices​.

Key Economic Data Awaited

Despite gold’s strong performance this week, traders are increasingly cautious as they await important U.S. economic data next week. Core PCE inflation—the Fed’s preferred inflation gauge—is due for release, and it will be closely monitored for signs of weakening inflation pressures.

If the data indicates that inflation remains elevated, the Fed may not be as aggressive in its next rate cut, which could temper the current bullish momentum. Furthermore, Federal Reserve Chair Jerome Powell’s upcoming speech will be crucial in signaling the central bank’s future policy direction​​.

Outlook for Next Week: Caution Ahead

While gold experienced a strong rally this week, the outlook for next week appears less certain. The absence of clear signals from Federal Reserve Chair Jerome Powell’s upcoming speech, combined with the release of Core PCE inflation data, could lead to cautious market behavior.

If inflation remains stubbornly high, traders may scale back expectations for further aggressive rate cuts, which could temper gold’s momentum. As a result, the market may see some profit-taking and consolidation in the short term while awaiting more clarity from economic data and Fed policy direction​​.