By Linh Tran, Market Analyst at XS.com
In yesterday’s session, gold broke above the psychological threshold of $3,400/oz, marking a new high since the Jackson Hole symposium. The main driver remains expectations that the Fed will soon begin its rate-cutting cycle in September, after Chair Jerome Powell delivered a “cautiously dovish” message, acknowledging rising risks in the labor market while noting signs of easing inflation. A weaker U.S. dollar and falling bond yields directly supported the rally in the precious metal.
However, the latest U.S. economic data has added more complexity to the picture. Preliminary Q2 GDP came in at 3.3%, above expectations of 3.1% and higher than the previous 3.0%, showing the economy is still maintaining strong momentum. At the same time, jobless claims fell to 229K, below forecasts, reflecting that the labor market has not cooled significantly. These figures could prompt the Fed to act more cautiously on rate cuts, thereby tempering gold’s momentum after breaking $3,400.
Beyond monetary policy, global trade dynamics are also adding key variables. Washington has imposed 50% tariffs on Indian imports due to the country’s continued purchases of Russian oil. This move could push up import costs and consumer prices in the U.S. during the year-end shopping season, fueling concerns of inflation returning. Such a scenario could force the Fed to stay cautious for longer, creating further uncertainty for gold.
Meanwhile, geopolitical instability continues to support safe-haven demand. The Russia–Ukraine conflict remains unresolved, tensions in the Middle East are escalating, and the U.S.–China strategic rivalry still poses risks of supply chain disruptions and higher energy costs. Against this backdrop, gold reaffirms its role as a “defensive asset,” favored in portfolios as macro risks intensify.
Looking at the medium term, the outlook for gold remains cautiously positive, supported by a combination of expectations that the Fed is nearing a rate-cutting cycle, safe-haven demand, and structural flows. In the short term, however, gold may continue to swing sharply around the $3,400 level as markets balance stronger GDP and labor market data with anticipation of today’s core PCE inflation release. This will be a key factor shaping expectations for the Fed’s policy path at the September meeting and could drive significant volatility in gold’s short-term trend.