Gold climbs to $3,646 as soft US PPI and geopolitical risks lift safe-haven demand

Gold price surged Wednesday, climbing over 0.60% following US inflation data that bolstered expectations for Federal Reserve easing at their September meeting. I’m watching XAU/USD trade at $3,646, just shy of the recent record high of $3,674.

The disinflation process resumed in August, with Producer Price Index data showing businesses absorbing some of Trump’s tariffs rather than passing costs to consumers. This, combined with Tuesday’s downward payrolls revision, has dramatically increased odds of Fed rate cuts next week.

I’ve noticed traders taking profits as the data supported further upside. What’s particularly interesting is how geopolitical tensions are providing additional fuel for gold’s rise - Russian drones violating Polish airspace could seriously escalate the Ukraine conflict, while Israel’s airstrike on Hamas leaders in Qatar undermines US peace efforts in the Middle East.

For gold traders like myself, tomorrow’s consumer inflation figures and Initial Jobless Claims could be decisive factors cementing the Fed’s rate cut decision.

Daily market movers: Gold edges up as US inflation ticks lower

The August PPI dropped from 3.1% to 2.6% year-over-year, with Core PPI falling to 2.8% from a revised 3.4% in July. This pushed rate cut expectations slightly more dovish, though the US Dollar Index remains flat around 97.75.

Treasury yields are declining, with the 10-year note down four basis points to 4.045%. Real yields have decreased nearly four basis points to 1.685%.

Thursday’s upcoming CPI data is expected to show an increase from 2.7% to 2.9% year-over-year, while Core CPI should hold at 3.1%.

The labor market picture continues to deteriorate, with the Bureau of Labor Statistics revising down annual benchmark payrolls to -911K for March 2025, worse than economists’ -682K estimate.

Poland’s shooting down of Russian drones that violated its airspace during Russia’s massive air strike on Ukraine adds significant geopolitical risk. The Polish Prime Minister called it an “intentional provocation” from Moscow.

Meanwhile, Chinese central bank data confirmed their gold buying streak extended to a tenth straight month in August.

Fed rate cut expectations now stand at 90% probability for 25 basis points, with just 10% odds for a larger 50 basis point cut.

Technical outlook: Gold price hovers below $3,650

Gold advances but remains below the critical $3,650 level and the all-time high of $3,674. The RSI is showing overbought readings, which could limit further gains and increase profit-taking. If the RSI drops below 70, we might see a sharp pullback.

Should XAU/USD fall below $3,600, support lies at $3,550, followed by the April 22 high of $3,500. Conversely, breaking above $3,650 would target the ATH before challenging $3,700.