Additionally, geopolitical risks from ongoing conflicts in the Middle East and the Russia-Ukraine war could continue to support gold prices.

Traders are awaiting more insights into the Federal Reserve’s future plans, focusing on the upcoming release of the Fed’s meeting minutes on Wednesday and a speech by Fed Chair Jerome Powell at the Jackson Hole Symposium, which may provide important clues about interest rates and economic policies.

Gold Hits $2,500 High on Dovish Fed, Falls on Risk-On Sentiment

The U.S. dollar came under pressure as expectations for a dovish Federal Reserve and potential rate cuts grew. Recent data, including the Producer Price Index and Consumer Price Index, showed inflation trending downward, reinforcing predictions of a 25-basis-point rate cut in September.

Despite strong U.S. retail sales easing recession fears, these inflation reports fueled speculation about Fed policy easing, which weakened the dollar and pushed gold prices to a record high above $2,500.

Additionally, the University of Michigan’s Consumer Sentiment Index rose to 67.8 in August, while inflation expectations remained steady.

Comments from Federal Reserve officials also contributed to the dollar’s decline. Chicago Fed President Austan Goolsbee noted that the U.S. economy is not overheating, suggesting caution in maintaining restrictive policies.