Gold Price Forecast - XAU/USD Holds $3,778 as Fed Cut Odds Hit 88% and China Imports Collapse 39%

Gold (XAU/USD) Pushes Toward $3,791 as Fed Bets and Weak Imports Drive Divergence

Gold prices continued their advance this week with spot bullion settling at $3,778.62 per ounce, up nearly 0.8% on Friday and closing just shy of the record intraday high of $3,791.26 earlier in the week. December gold futures also climbed 1% to $3,809, extending weekly gains of 2.1%. The strength came as the U.S. PCE index rose 2.7% year-over-year in August, in line with expectations, cementing investor conviction that the Federal Reserve will proceed with at least one rate cut before year-end. The CME FedWatch tool now implies an 88% probability of a cut in October and 65% odds of a second in December, keeping bullion well bid against a backdrop of steady inflation and moderate income growth.

Fed Outlook and Treasury Yields Underpin Gold’s Strength

The latest macro data left the Fed with optionality but not urgency. Core PCE increased 0.2% month-on-month and 2.9% annually, providing enough justification for easing while confirming inflation’s stickiness above target. Bond markets stayed muted, with the 10-year Treasury yield at 4.16% and the 30-year at 4.74%, showing that fixed income investors are awaiting labor market confirmation. As long as yields remain capped and rate cuts stay in play, the environment remains supportive for gold, allowing XAU/USD to defend elevated levels near $3,770 despite a stronger U.S. dollar earlier in the week.

China’s Waning Physical Demand Signals Strain at Record Prices

While ETF inflows remain strong, physical buying has weakened. China’s gold imports dropped 34% in August compared to the prior month, while Hong Kong’s net imports collapsed 39% to just 27 tons. Dealers in Shanghai and Hong Kong are now offering discounts ranging from $21 to $36 per ounce, the steepest since May 2020, as local buyers balk at near-$3,800 pricing. This softening in Asian demand is creating a stark divergence between Western financial flows into ETFs and real-world jewelry and retail consumption in Asia, historically the backbone of the gold market. If prices remain pinned near all-time highs, the risk of further erosion in physical demand looms.

Technical Landscape: Bulls Eye Breakout, Bears Watch $3,730

On the technical front, gold remains trapped in a narrow band between support and record resistance. Spot XAU/USD has tested $3,791.26 multiple times without a confirmed breakout. A sustained push above that level opens the door toward $3,879.64, the next Fibonacci extension, and potentially $3,915. Conversely, immediate downside support sits at $3,730, with a deeper safety net near $3,712 tied to the 50% retracement of the September leg higher. A close below $3,712 risks a correction toward $3,693, unwinding nearly two weeks of bullish momentum. The RSI at 57 signals neutral positioning, while candlestick rejection at highs indicates fading conviction from momentum traders.

Macro Growth Trends and ETF Flows Reinforce Strategic Appeal

Despite softness in Asia, Western demand remains resilient. Global ETFs linked to gold continue to see inflows, positioning bullion as both a hedge against dollar volatility and a store of value amid tariff uncertainty. Revised U.S. GDP growth at 3.8% annualized in Q2 and the Atlanta Fed’s Q3 tracker at 3.9% show that economic expansion is holding, complicating the Fed’s rate path. Still, investors have poured into gold as a counterweight to equities trading at stretched 22.5x forward earnings, above both the five- and ten-year averages. With central banks maintaining net purchases and M2 money supply growth re-accelerating to 6% globally, gold retains structural support from liquidity-driven flows.

Verdict: XAU/USD Short-Term Neutral, Long-Term Bullish

The immediate battle sits between $3,730 and $3,791. Holding above $3,730 keeps gold in a consolidation phase with breakout potential, while a decisive push through $3,791 sets up acceleration to $3,879 and beyond. The physical demand drop in China is a near-term drag, but institutional ETF inflows and dovish Fed expectations outweigh retail softness. For now, XAU/USD is a Hold in the short-term range, but with structural liquidity, Fed easing, and central bank buying as backstops, the long-term outlook remains bullish, targeting $3,900+ into 2026.

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