XAU/USD climbs above $2,450 as NFP eyed

Gold prices surged past $2,450 on Thursday, fueled by the Federal Reserve’s (Fed) signal of potential rate cuts and escalating tensions in the Middle East. The Fed expressed increased confidence in a slowing inflation rate during the second quarter, bolstering expectations for a policy shift.

The XAU/USD index reached a two-week high of $2,462.30 as US bond yields plummeted, reflecting growing anticipation of a Fed pivot in September. Lower yields on interest-bearing assets make non-yielding assets like gold more attractive.

Fed Chair Jerome Powell hinted at a possible rate cut in September if inflation continues to moderate and the labor market remains stable. This dovish stance significantly increased expectations for a rate reduction.

The US dollar exhibited volatility due to weaker-than-expected economic data, including Unit Labor Costs and the ISM Manufacturing PMI. However, the focus remains on Friday’s Nonfarm Payrolls (NFP) report, which is expected to show a slowdown in job growth and wage increases.

Apart from the Fed’s stance, geopolitical tensions in the Middle East, particularly Iran’s vow to retaliate for the killing of a Hamas leader, have enhanced gold’s safe-haven appeal.

Overall, gold’s near-term outlook remains positive due to multiple tailwinds, including potential rate cuts, geopolitical risks, and a weaker US dollar.