Gold Price Forecast - XAU/USD Climbs Toward $3,700 With Fed Cuts and Record Demand in Focus

Gold (XAU/USD) Surges Toward $3,700 as Fed Cut Bets, Dollar Weakness, and Central Bank Demand Align

XAU/USD Pushes to Fresh Highs With Inflation Pressures and Weak Labor Market

Gold (XAU/USD) continues to press record territory, trading around $3,685 per ounce after reaching an intraday high of $3,695.50. Spot prices climbed 40% year-to-date, making 2025 one of the strongest years in decades for bullion. August CPI rose 0.4% month-on-month and 2.9% annually, while jobless claims surged to 263,000 — the highest since 2021 — fueling stagflation concerns. Nonfarm payroll growth slowed to just 22,000, while unemployment rose to 4.3%. This macro backdrop has investors nearly fully pricing a 25 bps rate cut at the Fed’s September meeting, with a 7% chance of a larger 50 bps cut. Historically, easing cycles have provided powerful support for non-yielding assets like gold.

Forecasts Climb as UBS and Commerzbank Lift Targets

Major institutions have raised price projections. UBS now expects gold to reach $3,800/oz by year-end and $3,900/oz by mid-2026, citing a 200-basis-point Fed easing cycle and a weaker dollar. Commerzbank also raised its end-2026 target to $3,800, up from $3,600. Goldman Sachs is more aggressive, suggesting a base case of $4,000 by mid-2026 and even a $4,500–$5,000 tail scenario if U.S. political pressures undermine Fed independence. The investment bank notes that if just 1% of privately held Treasuries were reallocated into bullion, it could drive the next leg higher. Analysts emphasize that unlike the volatile spike of 1980 — when gold peaked at $850 ($3,590 inflation-adjusted) — today’s surge is supported by deeper liquidity, ETFs, and institutional allocations.

ETF Holdings and Central Bank Purchases Reinforce Structural Demand

ETF flows are approaching historic records, with total holdings forecast to exceed 3,900 metric tons by the end of 2025, nearly touching the all-time high of 3,915 tons from October 2020. Weekly inflows have already surpassed 700 tons this year, marking one of the most aggressive institutional accumulation phases on record. Central banks remain net buyers at roughly 900–950 tons in 2025, slightly below last year’s record 1,000 tons. This ongoing official sector demand reflects geopolitical hedging, especially in emerging markets diversifying away from the dollar. The total value of London vault reserves surpassed $1 trillion last month, showing how institutions continue to build long-term gold positions.

Dollar Weakness and Falling Real Yields Add Momentum

The U.S. dollar index sits at 97.7, down on the month, while five-year TIPS yields dropped over 20 bps to their lowest since mid-2022, both of which are historically bullish for gold. Real rates are now projected to fall further into year-end as easing accelerates. With U.S. President Donald Trump repeatedly pressing for lower interest rates, and markets already pricing three cuts before year-end, the environment for gold remains highly favorable. Treasury demand has weakened under this policy backdrop, redirecting flows into bullion as an alternative safe-haven hedge.

Technical Structure Points to $3,700 Breakout

On the technical side, gold remains firmly bullish. The 20-day EMA is trending higher at $3,518, while the RSI has surged to 80, bordering on overbought territory but consistent with strong momentum phases. Key resistance sits at $3,700, which if broken could open the path to $3,800 in the near term. Support lies first at $3,500 and deeper around $3,360, but each dip has been consistently absorbed by buyers this year. Year-on-year, gold has climbed from $2,529 in September 2024 to $3,685 now, a 45% gain. Over the past month alone, prices surged 9.4%, highlighting the sustained bid under current macro stress.

Global Demand Shifts and Consumer Channels Expand

Beyond institutions, retail and corporate participation has grown. In the U.S., consumer access through Costco (NASDAQ:COST) has gained traction as the retailer sells gold bars, silver coins, and platinum, broadening exposure for households looking to hedge inflation. In Asia, physical demand has stayed resilient even with higher prices, while in Europe, wealth managers are allocating mid-single-digit portfolio weights to bullion as a defensive anchor. Analysts stress that the current rally is not purely speculative but reflects broad structural allocation shifts.

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