Gold Price Steadies as Inflation Data Delays Aggressive Fed Cuts

Gold (XAU/USD) Faces Inflation Headwinds as Fed Signals Temper Aggressive Cuts

The gold market has been navigating a complex set of macroeconomic and technical forces in mid-August 2025, with XAU/USD oscillating between multi-week support zones and the upper bounds of its consolidation range. Spot prices recently traded near $3,344 per ounce, down 0.3% on the day, while U.S. gold futures slipped to approximately $3,394. This softness followed a hotter-than-expected U.S. Producer Price Index reading for July, which surged 3.3% year-over-year compared with the forecast of 2.5%, marking the steepest annual rise since mid-2022. Weekly jobless claims printed at 224,000, lower than expectations of 228,000, adding further pressure to gold by strengthening the U.S. dollar and lifting Treasury yields. The combination effectively diminished market bets on a supersized 50-basis-point Federal Reserve rate cut in September, shifting consensus toward a quarter-point move while deferring larger policy easing to later in the year.

Macro Policy Landscape and Fed Outlook Bolster Long-Term Bullish Case

Treasury Secretary Scott Bessent has been publicly advocating for an aggressive series of cuts totaling at least 150 basis points, but key Fed officials, including Mary Daly, have pushed back on the need for such a large initial move. Despite the immediate negative reaction to stronger inflation data, the long-term fundamental backdrop for XAU/USD remains constructive. Gold is still up close to 30% year-to-date, supported by sustained geopolitical risks and the expectation that the Fed will eventually prioritize economic support over inflation control. The 10-year U.S. Treasury yield is holding near multi-week lows, enhancing gold’s appeal as a non-yielding defensive asset.

Price Consolidation Near $3,355 Amid Symmetrical Triangle Formation

Following a three-day rally driven by softer CPI figures and rising geopolitical tensions, XAU/USD has been consolidating near $3,355. The daily chart reveals a symmetrical triangle pattern bounded between $3,100 and $3,500, with the current price sitting in the upper half of the formation. Immediate resistance stands at $3,374, with support at $3,333 and a deeper cushion at $3,251, corresponding to the 50-day and 100-day exponential moving averages. The Relative Strength Index is neutral at 50–51, leaving room for directional expansion depending on upcoming macro and political developments. A breakout above $3,374 could open a path toward the $3,500 psychological barrier, while a decisive breach below $3,250 risks a slide to $3,100.

Geopolitical Undercurrents Drive Safe-Haven Demand

The upcoming summit between U.S. President Donald Trump and Russian President Vladimir Putin is adding layers of uncertainty to the market. Trump’s warnings of severe consequences if Russia refuses to end the war in Ukraine have raised the possibility of sanctions targeting Russian oil exports. Any resulting commodity market disruption could bolster demand for gold as a store of value, especially if coupled with other geopolitical flashpoints. In the run-up to this meeting, safe-haven buying has been reinforced by broader global trade risks and the potential for policy shifts that impact currency markets.

Short-Term Technical Pressure Following Failed Break Above $3,500

Earlier in August, gold attempted to breach the $3,500 level but failed, triggering a retreat toward the $3,400 area. Since then, XAU/USD has moved in a sideways range, testing both its upper resistance and the 50-day EMA support near $3,345. Price action shows elongated wicks on daily candles, a sign of trader indecision at current levels. If the metal breaks above $3,375, the next resistance band lies between $3,400 and $3,410, with further upside toward $3,440 and then the previous record peak at $3,500. On the downside, a close below $3,330 could expose $3,305–$3,315, followed by the $3,282 level from early August.

Volatility Drivers: U.S. Data Releases and Fed Rhetoric

Gold traders are closely watching a packed U.S. economic calendar, with upcoming CPI, PPI, industrial production, retail sales, and consumer sentiment data. The July CPI is expected to print at 2.8% year-over-year, with core CPI projected above 3% for the first time since February. Retail sales are forecast to slow to 0.5% month-on-month from 0.6%. The U.S. Dollar Index has rebounded to 98.52, up 0.26%, capping gold’s upside momentum, while the 10-year Treasury yield has eased to 4.265%. Fed funds futures show an 84% probability of a 25-bps cut in September, leaving room for repricing if incoming data surprises on the downside.

Medium-Term Performance and Central Bank Demand

Over the past year, gold has surged 38.1% from $2,468 to over $3,400, driven by robust demand from central banks diversifying away from the dollar and geopolitical uncertainty. Goldman Sachs projects gold could reach $3,700 by year-end 2025, a potential 40% annual gain from January’s $2,633 opening price. This forecast is underpinned by global monetary easing cycles, central bank reserve accumulation, and heightened risk hedging among institutional portfolios.

Strategic View and Bias

From a structural perspective, the market remains in a primary uptrend that has persisted since 2017, interrupted by periods of range-bound consolidation. The present symmetrical triangle is approaching its apex, suggesting a breakout is imminent. Given the interplay of Fed policy risk, geopolitical catalysts, and technical positioning, the bias for XAU/USD remains bullish on a medium-term horizon. However, in the near term, price is likely to remain sensitive to each incremental shift in macroeconomic expectations, making tactical entries around $3,330–$3,340 attractive for accumulation with a target toward $3,500 and, if broken, an extension to $3,700.

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