Economic data released throughout this week further supported the case for continued rate cuts. The personal consumption expenditure (PCE) price index, a key indicator of inflation, rose 0.1% month-on-month in August and 2.2% year-on-year, slightly below economists' expectations of 2.3%. The core PCE index, which excludes food and energy, was also in line with expectations, rising 0.1% month-on-month and 2.7% year-on-year. These inflation indicators supported expectations that the Fed could cut rates again before the end of the year, as inflation remains close to the central bank's 2% target.
Meanwhile, unemployment claims fell more than expected and durable goods orders were flat, further demonstrating the resilience of the US economy despite the Fed's aggressive rate cuts.
Geopolitical tensions increase demand for safe havens
In addition to the Fed's actions, ongoing geopolitical tensions, particularly in the Middle East, provided strong support for gold prices. The conflict between Israel and Hezbollah escalated last week, with Israeli airstrikes in Lebanon further increasing risk sentiment. Investors looking to escape potential global instability increased their exposure to gold, boosting demand. Analysts expect these geopolitical risks to persist, keeping gold's appeal as a safe-haven asset intact.
ETF inflows and central bank demand support bullish trend in gold
Another key factor driving the rise in gold prices is the recovery in inflows into gold-backed exchange traded funds (ETFs).
