Gold Price Forecast: XAU/USD Climbs Toward $3,350 on Rising Fed Rate Cut Bets

Gold Price Rises on Hopes of Fed Rate Cut Amid Mixed Inflation Data

Asian session sees gold bounce back
The price of gold (XAU/USD) rebounded early Wednesday in the Asian session, reaching close to $3,350. This rise follows a short-term dip to around $3,330 earlier in the week. The shift in market sentiment stems from growing speculation that the U.S. Federal Reserve may initiate a rate cut as early as September.

Inflation data fuels speculation
According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) increased by 2.7% year-over-year in July, aligning with market expectations. Meanwhile, the core CPI, which excludes volatile food and energy prices, climbed by 3.1%, slightly above forecasts of 3% and higher than June’s 2.9%.

On a monthly basis, both the headline and core CPI showed stronger-than-expected gains, up 0.2% and 0.3% respectively. Despite this, traders still believe that inflation is sufficiently under control to justify monetary policy easing.

Market adjusts to higher probability of rate cuts
Following the release of inflation data, the CME FedWatch Tool showed an increase in the implied probability of a Fed rate cut in September and a potential follow-up cut in October — now at 67%, up from 55% just a day earlier. Lower interest rates generally benefit gold, a non-yielding asset, by decreasing the opportunity cost of holding it.

Potential headwinds from geopolitics
Although monetary policy developments are supporting gold, easing tensions between the U.S. and China may limit the metal's upward momentum. A more stable global trade environment typically shifts investor appetite away from safe-haven assets like gold.

Outlook
With multiple Fed officials, including Austan Goolsbee and Raphael Bostic, scheduled to speak later on Wednesday, traders will closely watch for any clues about the central bank’s policy direction. The next major moves in gold will likely hinge on those communications and upcoming macroeconomic data.