Gold (XAU) Price Forecast: Can Geopolitical Tensions and Inflation Push Gold Prices Higher?

Safe-Haven Demand Keeps Gold Afloat Amid Middle East Conflict

Gold prices experienced notable swings this week as traders balanced geopolitical tensions, U.S. inflation data, and shifting expectations around Federal Reserve monetary policy. After starting the week on a relatively stable note, prices faced pressure mid-week but rebounded strongly by Friday due to renewed expectations of a Fed rate cut.

Last week, XAU/USD settled at $2657.18, up $3.34 or +0.13%.

Throughout the week, the ongoing conflict in the Middle East, particularly involving Israeli airstrikes on Hezbollah positions, has been a consistent driver of safe-haven demand for gold. Investors looking for protection from global market uncertainty turned to bullion, which helped limit gold’s downside despite a stronger U.S. dollar. However, geopolitical risks alone were not enough to push prices significantly higher, as traders kept a close eye on upcoming U.S. economic data​​.

Inflation Data Shifts Market Sentiment Toward Fed Rate Cuts

The major factor behind price movements this week was the outlook for U.S. inflation and Federal Reserve policy. Early in the week, better-than-expected nonfarm payroll data raised doubts about the extent of potential rate cuts, causing a selloff that took gold to its lowest point in two weeks​. However, U.S. inflation data released on Thursday, showing a small increase but the slowest annual rise in over three years, shifted expectations back in favor of a rate cut at the Fed’s November meeting​​.

Dollar Strength Weighs on Gold’s Rally, But Relief Could Be Near

The U.S. dollar remained strong for most of the week, supported by robust economic data and its role as a safe-haven currency. This strength limited gold’s upward movement, especially for foreign buyers who faced higher costs. Additionally, U.S. Treasury yields stayed elevated, increasing the opportunity cost of holding non-yielding assets like gold​​. However, as inflation data softened and a Fed rate cut became more likely, both the dollar and yields eased slightly, giving gold prices some breathing room​.

Gold Rises as Fed Rate Cut Bets Gain Momentum

Friday’s Producer Price Index (PPI) report strengthened the case for monetary easing, reinforcing expectations of a 25-basis-point rate cut next month. This pushed gold prices higher, as lower interest rates tend to support non-yielding assets like bullion​​. By the week’s end, gold managed to turnaround, closing above key support levels.

Gold Forecast: Range-Bound, But Poised for a Breakout

Looking ahead to next week, gold is expected to trade within a relatively narrow range, with support likely around $2,604.39 and resistance near $2,685.64. It’s mid-point at $2645.01 is likely to control the direction this week.

While geopolitical tensions will continue to support demand, much will depend on further U.S. economic data and any escalation in the Middle East. A more dovish Fed could help push gold higher, but progress may be capped by a strong dollar and ongoing inflation concerns​​.

For now, the outlook remains cautiously positive, with potential for gains if the Federal Reserve confirms its rate cut plan and geopolitical risks persist.