Throughout the week, economic data releases further supported the case for continued rate cuts. The Personal Consumption Expenditures (PCE) price index, a critical measure of inflation, rose 0.1% month-over-month in August and 2.2% year-over-year, slightly below economists’ expectations of 2.3%. The core PCE index, which excludes food and energy, also rose by 0.1% for the month and 2.7% year-over-year, aligning with forecasts. These inflation readings reinforced the outlook that the Fed could cut rates again by the end of the year, as inflation remains close to the central bank’s 2% target.
Jobless claims fell more than expected, and durable goods orders remained flat, indicating resilience in the U.S. economy despite the Fed’s aggressive rate cuts.
Geopolitical Tensions Boost Safe-Haven Demand
In addition to the Fed’s actions, ongoing geopolitical tensions, particularly in the Middle East, provided strong support for gold prices. Conflict between Israel and Hezbollah escalated last week, with Israeli airstrikes in Lebanon further heightening risk sentiment. Investors seeking refuge from potential global instability increased their exposure to gold, pushing demand higher. Analysts expect these geopolitical risks to persist, keeping gold’s safe-haven appeal intact.
Insight: Geopolitical tensions are often a catalyst for investors to flock to safe-haven assets like gold as a way to protect their portfolios from uncertainty and volatility in the markets. This increase in demand can lead to a bullish trend in gold prices.
ETF Inflows and Central Bank Demand Support Gold’s Bullish Trend
Another key factor driving gold’s rally has been the return of inflows into gold-backed exchange-traded funds (ETFs).
Insight: The resurgence of inflows into gold-backed ETFs indicates investor interest in gold as a valuable asset in times of economic uncertainty. Additionally, central banks around the world have been increasing their gold reserves, further supporting the bullish trend in gold prices.
