Gold (XAU/USD) is holding firm near the $3,750 level in Wednesday’s Asian session, consolidating after a modest pullback from Tuesday’s all-time high. Expectations for further Federal Reserve (Fed) rate cuts and heightened geopolitical risks from the Russia-Ukraine war and Middle East conflicts continue to underpin the safe-haven metal. A softer global risk tone is also providing additional support.
Fed caution tempers upside momentum
The US dollar is regaining ground after two days of losses, supported by Fed Chair Jerome Powell’s cautious remarks on rate cuts. Powell reiterated that policymakers must carefully balance persistent inflation pressures with signs of labor market weakness, warning that easing too aggressively could leave the inflation fight unfinished. His comments limited fresh bullish momentum in gold, particularly as prices remain in overbought territory.
Still, market expectations for Fed easing remain firm. Traders see rate cuts in both October and December following the 25 basis points reduction earlier this month, helping gold attract dip-buying despite headwinds from the stronger dollar.
Geopolitical backdrop keeps safe-haven demand strong
Geopolitical tensions remain elevated, adding to gold’s appeal. NATO warned Russia it is prepared to use all necessary measures to defend member states after recent airspace violations involving Estonia, Poland, and Romania. At the same time, the conflict in the Middle East escalates as Israel intensifies its operations in Gaza. A UN report this week accused Israel of aiming to establish permanent control over Gaza and enforce demographic changes in the West Bank, fueling concerns about a wider regional conflict.
Key us data ahead
Investors now look to upcoming US economic releases for direction. New Home Sales data will be followed by Thursday’s final Q2 GDP and Durable Goods Orders, with the Fed’s preferred inflation measure, the PCE Price Index, due Friday. These releases will be crucial in shaping both USD sentiment and the near-term trajectory of XAU/USD.
Technical outlook
Gold needs a sustained break above the $3,800 mark to confirm further bullish momentum. Failure to clear this resistance could signal exhaustion, with initial support seen around $3,750. A decisive move below this level could expose the $3,710–$3,700 zone, while holding above $3,800 would likely pave the way for an extension of the recent uptrend.
