Gold (XAU) Price Forecast: Rally Continues, Is $2649 the Next Target for Bulls

Gold Prices Rally on Rate Cut Speculation, Dollar Weakness

Gold prices climbed on Monday, hovering near its all-time high. The metal reached $2589.72 but remains below the key $2600 psychological level. The upward momentum is driven by expectations of a U.S. Federal Reserve rate cut and a weaker dollar, making gold more appealing to investors seeking safe-haven assets.

At 10:46 GMT, XAU/USD is trading $2579.22, up $0.51 or +0.02%.

Fed Rate Cut Speculation Pushes Gold Higher

Anticipation of a Federal Reserve rate cut this week has significantly supported gold prices. According to the CME FedWatch tool, traders now see a nearly 50% chance of a 50-basis point reduction, up from 28% just days ago. Former New York Fed President Bill Dudley added to the momentum, advocating for a larger cut to stimulate economic growth. This stance, combined with dovish reports from the Financial Times and Wall Street Journal, fueled bullish sentiment in gold markets.

However, core inflation data released last week complicates the narrative. The Consumer Price Index (CPI) report showed core inflation rising above expectations, challenging the likelihood of an aggressive rate cut. As Seema Shah, chief global strategist at Principal Asset Management, noted, “Core inflation is still too high for the Fed to confidently execute a 50-basis point cut.” This concern tempers market optimism, with most traders still betting on a 25-basis point cut.

Macroeconomic and Geopolitical Factors Boost Gold Appeal

Aside from the Fed’s decision, other factors are contributing to gold’s upward trend. Geopolitical tensions, including U.S. election uncertainties, have also driven safe-haven demand. The recent assassination attempt on presidential candidate Donald Trump added another layer of market risk, pushing traders toward gold as a refuge. Additionally, a weaker U.S. dollar, which dropped 0.4%, has made gold more attractive to foreign investors.

Gold Price Projections Signal Further Gains

Based on recent price action, gold is set to continue its upward climb. From June to mid-July, XAG/USD gained $190.05 in 15 market sessions. A similar pattern unfolded from July to mid-August, with a rally of $178.58 in 18 sessions. Current technical indicators suggest a similar upswing, potentially pushing gold toward the $2649.43 to $2660.90 range over the coming days.

Market Forecast: Bullish Momentum Likely to Continue

Given the combination of Fed rate cut expectations, ongoing geopolitical concerns, and a weakening dollar, gold prices are likely to see further bullish momentum in the short term. If the Fed opts for a 50-basis point cut, gold could surge past its current levels. However, even with a 25-basis point cut, the overall outlook remains positive, with prices forecasted to test new highs. Traders should watch for volatility following the Fed’s decision, but the long-term outlook for gold remains strong.