Gold prices (XAU/USD) remain resilient above $2,400 during Friday’s European session, buoyed by expectations for aggressive Federal Reserve rate cuts and ongoing geopolitical tensions. The recent stock market rout, driven by fears of a potential U.S. economic slowdown due to a sharp deceleration in job growth and rising unemployment, has intensified expectations for rate reductions.
Fed policymakers have acknowledged the cooling labor market and expressed confidence that inflation is moving towards the 2% target. However, they have emphasized that their decisions will be guided by economic data rather than stock market fluctuations or political pressures. Chicago Fed Bank President Austan Goolsbee reinforced this stance on Thursday, stating, “We’re not in the business of responding to the stock market. We’re in the business of maximizing employment and stabilizing prices,” as reported by Reuters.
In addition to domestic economic factors, escalating tensions in the Middle East are further supporting gold’s appeal as a safe-haven asset. Concerns have been raised over potential Iranian retaliation following an airstrike in Tehran that killed a Hamas leader.
Looking ahead, gold prices will be influenced by the U.S. Consumer Price Index (CPI) data for July, scheduled for release on Wednesday. This inflation data will be critical in assessing whether current market expectations for rate cuts are justified.
