Quick overview

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The stronger greenback pushed XAU/USD lower during Monday’s early Asian session, bringing it down to about $ 3 360 per ounce.

However, the yellow metal’s decline may be limited by growing expectations of a rate cut in September following remarks made by Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole symposium. Powell has hinted at a rate cut at the September meeting, but if inflation pressures continue to rise, that stance may become more difficult.

Powell noted that the US economy is in a “challenging situation,” with inflation risks now tilted to the upside and employment risks to the downside.

The bullion ended last week’s final trading session up more than 1 percent and approaching the $ 3,400 mark, supported by new monetary policy expectations amid Powell’s remarks at Jackson Hole. Since markets are pricing in the possibility that a drop in US interest rates could weaken the dollar and boost short-term demand for gold as a safe-haven asset, buying pressure remains steady.

The outlook for the Federal Reserve has shifted following Powell’s statements. He also warned about weakness in employment and economic activity, altering the probability for interest rate moves, even though he acknowledged inflation may start to moderate soon.

A significant change in the interest rate trajectory is suggested by the 43 percent chance of rate cuts. Lower bond yields reduce the appeal for safe assets like bonds, encouraging money to flow into other safe havens, such as gold, making this dynamic crucial. Gold becomes more attractive as the opportunity cost of holding it declines. If this market sentiment persists, XAU/USD could see increased buying pressure soon.

Spot gold (XAU/USD) closed last week at $3,374 per ounce, while gold futures settled even higher at $3,418.50, giving the gold market fresh bullish momentum as August nears its end. Jerome Powell, chair of the Federal Reserve, used dovish language at Jackson Hole, emphasizing risks of slower growth and potential rate cuts in September, driving the move.

The probability of a 25-basis point cut increased to 85% from 75%, according to CME Fed Watch. This shift instantly drove the dollar lower, down about 1 percent for the day, boosting demand for safe havens like gold that don’t yield. Gold continued its breakout amid the dollar’s sharp decline, and the relationship was clear