Gold prices (XAU/USD) rebounded to near $2,665 in early Asian trading on Monday, buoyed by heightened geopolitical tensions and growing expectations of a substantial interest rate cut by the Federal Reserve (Fed) in November.
Tensions in the Middle East have intensified as Israel continues its airstrikes on Hezbollah targets in Lebanon. Over 100 people were killed, and more than 350 injured on Sunday, according to CNN. Israel’s recent assassination of Hezbollah leader Hassan Nasrallah has further escalated the conflict along the Lebanese border, fueling safe-haven demand for gold as investors seek protection from rising geopolitical risks.
Meanwhile, economic data from the US has supported expectations of further easing by the Fed. The US Bureau of Economic Analysis (BEA) reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.2% year-over-year in August, down from 2.5% in July and slightly below expectations of 2.3%. Core PCE, a closely watched inflation gauge by the Fed, rose by 2.7%, in line with market forecasts. The easing inflation pressures have led to increased speculation that the Fed may cut rates, which would enhance the appeal of non-yielding assets like gold.
Looking ahead, gold traders are keeping a close eye on China’s Purchasing Managers Index (PMI) for September, with forecasts showing a slight improvement in both manufacturing and services. Weaker-than-expected data could weigh on gold, given China’s role as a major gold importer.
As geopolitical risks remain elevated and the market awaits further signals from the Fed, gold is likely to see continued support in the near term.
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