Gold (XAUUSD) Price Forecast: Falling Yields and Softer Dollar Support Bullish Breakout

Gold Prices Forecast Fed Rate Cut Bets Push Bullion to Record Highs

Spot gold climbed to another all-time peak on Tuesday, reaching $3,659.44, supported by growing conviction that the Federal Reserve will deliver a rate cut at its upcoming policy meeting. The move keeps bullion firmly above the $3,600 level, with no visible resistance, although technical traders are eyeing price patterns for signs of selling pressure.

At 12:35 GMT, XAU/USD is trading $3649.13, up $13.28 or +0.37%.

Federal Reserve Rate Cut Expectations Drive Rally

Markets are assigning an 88% probability of a 25-basis-point cut at next week’s FOMC meeting, with a 12% chance of a more aggressive 50-basis-point reduction, according to CME’s FedWatch tool. The dovish outlook follows August’s weaker U.S. payrolls report, which amplified concerns about labor market weakness. Economists are also anticipating job revisions that could subtract up to 800,000 positions, potentially strengthening the case for faster easing.

Lower rates weaken the dollar and Treasury yields, boosting the appeal of non-yielding gold. The U.S. Dollar Index slipped to 97.25, a seven-week low, while the 10-year Treasury yield held near 4.06%, close to its five-month trough. The softer greenback made bullion more attractive to overseas buyers, further supporting inflows into gold-backed assets.

Treasury Yields and Inflation Data in Focus

Despite the broader downtrend, Treasury yields ticked slightly higher on Tuesday, with the 10-year at 4.068% and the 30-year at 4.711%. Traders are holding positions ahead of key inflation reports this week, with producer price data due Wednesday and consumer prices Thursday. These releases will be crucial in shaping Fed expectations and, by extension, short-term gold price action.

Technical Outlook for Spot Gold

While bullish momentum remains strong, technical analysis highlights both upside and downside levels. Swing chart signals suggest potential to test $3,879.64 if buying continues, but vulnerability exists down to $3,511.75, with major support at $3,500.20. RSI readings have moved into overbought territory, though analysts warn this is not a forward-looking indicator. A lower close would indicate selling pressure and potentially shift sentiment.

Gold Prices Projection Bullish Outlook

With the dollar weakening, Fed rate cut bets solidifying, and central bank demand underpinning the market, gold’s bias remains bullish in the near term. Traders are watching for a test of $3,700 if inflation prints come in softer than expected. Stronger-than-anticipated U.S. inflation would pose a risk, but the prevailing market setup favors continued upside in bullion prices.

Outlook: Bullish, with immediate resistance undefined and focus on $3,700 while key support holds at $3,500.

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