Gold rally gains ground on Fed easing bets and global trade truce

Gold (XAUUSD) is gaining strength as inflation eases and expectations for rate cuts grow. The Federal Reserve may lower interest rates soon, which will weaken the US Dollar and support gold. Political developments also lifted market sentiment. The US extended its tariff pause with China and scheduled a summit with Russia. These shifts improved confidence and helped gold maintain its upward momentum. However, the rally remains uncertain as investors await stronger signals.

Gold consolidates after inflation data and growing rate cut expectations

Gold prices extended modest gains in the Asian session, recovering part of the previous day’s drop to a two-week low. The move came as the US dollar lost momentum after Thursday’s Producer Price Index-driven surge. Traders appeared convinced that the Federal Reserve would resume its rate-cutting cycle in September, supporting demand for non-yielding assets like gold. However, the rebound lacked strong bullish conviction, keeping sentiment cautious.

The hotter-than-expected PPI release on Thursday tempered expectations for aggressive Fed easing. Headline PPI rose to 3.3% year-on-year in July, well above the forecast of 2.5%. This reinforced a short-lived dollar rally that briefly pushed gold down by about $45 intraday. The dollar’s recovery faded in Friday’s Asian trade as markets maintained a 90% probability of a September rate cut. Forecasts also point to two 25-basis-point cuts by year-end, limiting dollar strength and lending some support to gold.

Despite the softer dollar, a prevailing risk-on environment capped safe-haven demand for gold. Hopes of extended US-China tariff relief and optimism over the US-Russia summit on Ukraine eased market tensions. These developments boosted global sentiment and reduced the urgency to hold defensive assets. As a result, traders hesitated to build aggressive long positions in gold without a stronger technical or fundamental trigger.

Attention now turns to upcoming US economic data, including retail sales, the Empire State Manufacturing Index, and consumer sentiment readings. These releases could set the tone for gold heading into the weekend. Still, the metal is on track to post its first weekly loss in three weeks. The lack of sustained buying interest suggests the downside bias remains intact. Any rally from current levels could face selling pressure, limiting the scope for a lasting recovery.

Gold breaks multi-decade resistance in historic technical breakout

The gold chart below shows one of the most important technical developments in recent times. It highlights three major bull cycles over the past several decades. Gold entered its first bull phase after 1971, when it was no longer tied to the dollar. Prices surged above $200 by the late 1970s. A sharp breakout in 1978 triggered a steep vertical rally.

The second bull phase followed a long period of consolidation. Between 1980 and 2000, gold prices remained relatively stable, forming a large base. A breakout occurred around 2002–2003, clearing long-term resistance. This breakout led to a strong uptrend. Prices jumped from roughly $250 to over $1,900 by 2011. This phase confirmed the presence of a massive cup-and-handle pattern.

The third bullish phase is currently in progress. Gold recently broke above the $2,000 level. This breakout cleared a multi-decade resistance line that had remained unbroken for decades. It aligns with rising debt, concerns about inflation, and geopolitical risks. A parabolic curve on the chart shows the rapid pace of the move. The pattern mirrors previous bull phases but points to a potentially stronger rally. The arc projects a surge toward $4,500 or beyond, suggesting a potential gold supercycle.

---

Unlock exclusive gold and silver trading signals and updates that most investors don’t see. Join our free newsletter now!