Gold climbs to $3,646 as soft US PPI and geopolitical risks lift safe-haven demand
- Gold trades near record high after US PPI disinflation boosts odds of September Fed easing.
- Payrolls revision and softer producer prices strengthen the case for a rate cut, spurring safe-haven flows into Gold.
- Geopolitical risks from Russia–Poland tensions and Israel strikes on Hamas leaders support bullish momentum.
Gold price surges on Wednesday, up by over 0.60%, folllowing US inflation data, which increased speculation that the Federal Reserve (Fed) will resume its easing cycle at the upcoming September meeting. At the time of writing, XAU/USD trades at $3,646, shy of the record high of $3,674.
Bullion up 0.60% fueled by Fed cut bets, Middle East tensions and Russian drone incursion into Poland’s airspace
The Producer Price Index (PPI) in August revealed that the disinflation process resumed in August, as businesses seem to absorb some of the US President Donald Trump's tariffs, in exchange for maintaining consumer prices steady. Alongside this, Tuesday’s payrolls revision had increased the chances that the Fed will cut rates next week.
Traders seem to have made profits as the data supported further upside. Also, news of Russian drones violating Polish airspace could escalate the conflict linked to Russia’s invasion of Ukraine, a tailwind for Bullion prices.
In the meantime, Israel’s airstrike on Hamas leaders in Qatar hurts US peace efforts in the Middle East.
XAU/USD traders’ eyes are on the release of the latest inflation figures on the consumer side in the United States. This and Initial Jobless Claims for the week ending September 6, could be the last nail in the coffin to an utmost certain interest rate cut by the Fed.
Daily market movers: Gold edges up as US inflation ticks lower
- The US PPI in August witnessed a dip from 3.1% to 2.6% YoY. Core PPI came at 2.8% YoY, down from 3.4% downward revised in July. Pricing of rate cuts by the Federal Reserve, tilted 1 basis points dovishly. Meanwhile, the US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, is flat at around 97.75.
- US Treasury yields are falling, with the 10-year Treasury note down four basis points (bps) to 4.045%. US real yields—calculated by subtracting inflation expectations from the nominal yield—have decreased nearly four basis points to 1.685% at the time of writing.
- US inflation data will be announced this week. On Thursday, traders await the US CPI, which is expected to increase from 2.7% to 2.9% YoY on Thursday. Core CPI, excluding volatile items, is expected to hold steady at 3.1% YoY.
- The Bureau of Labor Statistics (BLS) revised down its annual benchmark payrolls to -911K for March 2025, exceeding economists’ estimates of -682K, according to Bloomberg.
- Regarding geopolitics Poland shot down Russian drones that crossed into its territory during Russia’s latest massive air strike on Ukraine. Poland called it an "act of aggression," and the Polish Prime Minister said the violation is an intentional provocation from Moscow.
- Chinese official data revealed that the People’s Bank of China (PBoC) extended its buying streak to a 10 straight month in August.
- Expectations that the Federal Reserve will cut rates next week 25 bps are at 90%. The chances for a 50 bps are slim at 10%, revealed Prime Market Terminal interest rate probabilities tool
Technical outlook: Gold price hovers below $3,650
Gold price advances, but it remains shy of the all-time high (ATH) of $3,674, trading below the crucial $3,650 figure. The Relative Strength Index (RSI) is at overbought readings, capping Bullion’s advance and increasing the likelihood of traders booking profits. If the RSI pierces back below 70, XAU/USD could retreat sharply.
If XAU/USD drops below $3,600, the first support would be $3,550, followed by the April 22 high of $3,500. Conversely, if Gold advances past $3,650, the next resistance would be the ATH ahead of $3,700.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
