Under the shadow of global economic uncertainty, gold as a traditional safe-haven asset is once again shining brightly. After reaching a historic high of $2,674 on Tuesday, spot gold continued its strong momentum on Wednesday (September 10), closing at $2,640.44 per ounce, up approximately 0.4%, with year-to-date gains exceeding 39%. Behind this round of gold price increases are unexpectedly weak US PPI data, further solidified Fed rate cut expectations, and ongoing geopolitical tensions. These factors are intertwining to drive the gold market into a new bull cycle. Investors are closely watching the upcoming CPI data release, which will further determine the Fed's policy path. During Thursday's (September 11) early Asian trading session, spot gold fluctuated slightly higher, currently trading around $2,545 per ounce.

**PPI Data Unexpectedly Declines: Inflation Pressure Eases, Rate Cut Door Wide Open**

The US August Producer Price Index (PPI) unexpectedly fell 0.1% month-over-month, far below economists' expectations of a 0.3% increase, while July data was also revised down to 0.7%. This unexpectedly weak performance directly alleviated market inflation concerns.

As a key indicator measuring price pressures at the production level, PPI's year-over-year increase was only 2.6%, below the expected 3.3%, indicating that inflationary momentum in the US economy is cooling. The decline in service prices was the main drag factor, echoing last week's weak non-farm payroll report, which showed only 22,000 job additions in August, with employment growth estimates through March being significantly revised down by 911,000. These data collectively paint a picture of a slowing US economy with clear signs of labor market cooling.

Against this backdrop, market expectations for Fed rate cuts have further strengthened. According to the CME's FedWatch tool, the probability of the Fed cutting rates by at least 25 basis points at the September 16-17 meeting is 100%, with even an 8% to 10% possibility of a larger 50 basis point cut.

Analysts point out that the weak PPI data provides the Fed with ample room for rate cuts, as Fed Chairman Powell hinted at the Jackson Hole meeting that policy easing is imminent. Gold, being an interest rate-sensitive asset, naturally benefits from this - rate cuts typically weaken the dollar's appeal, driving funds into non-yielding assets like gold, thereby supporting gold price increases.

City Index market analyst Fawad Razaqzada emphasized that if US data continues to weaken, there could be more than two rate cuts by year-end, which would further amplify gold's upward momentum.

**Dollar and Bond Market Correlation: Yield Curve Changes Highlight Gold's Safe-Haven Appeal**

The dollar index fluctuated after the PPI data release, closing Wednesday at 97.83, up only 0.08%, with a cumulative decline of nearly 10% year-to-date. This weak trend is mainly due to chaos in US trade and fiscal policies, as well as growing concerns about Fed independence. Notably, a federal judge temporarily blocked President Trump's attempt to dismiss Fed Governor Cook, viewed as an early setback for White House pressure on Fed independence, further adding market uncertainty. Although the dollar index lacks clear direction, its overall downward trend provides strong support for gold, as gold is priced in dollars and dollar weakness often enhances gold's relative attractiveness.

Meanwhile, the US bond market reflects similar market sentiment. The 10-year Treasury yield fell 3.6 basis points Wednesday to 4.038%, hitting a five-month low; the 30-year Treasury yield closed down 3.2 basis points at 4.685%. This yield decline benefited from the unexpected PPI drop and strong demand in the 10-year Treasury auction - with bid-to-cover ratios at their highest since April and indirect bidding ratios at their second-highest historically, showing strong interest from foreign investors and central banks in US Treasuries.

The 2-year to 10-year Treasury yield spread narrowed to 49.6 basis points, with this curve change viewed as an economic expectation indicator, suggesting market concerns about future growth. Treasury Inflation-Protected Securities (TIPS) breakeven rates also show expected average annual inflation over the next ten years below 2.4%, close to the Fed's 2% target, further consolidating rate cut expectations.

Declining bond yields typically reduce the opportunity cost of holding gold, driving investors toward gold as a safe-haven tool, especially amid frequent economic slowdown signals.

**Escalating Geopolitical Risks: Gold Shows Resilience Amid Stock Market Optimism**

Escalating geopolitical tensions also provide additional support for gold. Israel's airstrikes on Qatar attempting to assassinate Hamas leaders, and Poland shooting down Russian drones entering its airspace, continue overnight tensions and keep investors on edge.

In an environment of rising global uncertainty, gold's safe-haven properties are further amplified. Despite strong US stock market performance - the S&P 500 rose 0.30% to 6,532.04 points and the Nasdaq gained 0.03% to 21,886.06 points, both setting new closing record highs - this was mainly driven by Oracle's 36% surge due to surging AI cloud service demand. Oracle's market cap is approaching Tesla's, boosting chip manufacturers and power supply company stocks, while Barclays and Deutsche Bank raised their S&P 500 year-end 2025 targets citing strong corporate earnings and AI optimism.

However, stock market optimism hasn't completely overshadowed economic concerns. The S&P 500 has climbed about 11% this year and the Nasdaq up about 13%, but valuations are already elevated, as Bank of America Wealth Management Senior Investment Director Bill Northey noted, creating pressure for continued upside. In contrast, gold's gains are even more impressive, demonstrating its resilience under multiple risks.

Investor focus is shifting to Thursday's CPI data, expected to rise 0.3% month-over-month and 2.9% year-over-year. If actual data comes below expectations, it will further strengthen the rate cut path and drive gold to new highs.

**Summary**

In conclusion, the current strength in the gold market stems from weak US economic data, geopolitical risks, and multiple positives from Fed policy shifts. Although gold prices may fluctuate in the short term due to CPI data, the overall bull market pattern is established, with year-to-date gains exceeding 39% suggesting more upside potential. Investors should be alert to potential risks such as unexpected inflation rebounds or geopolitical tensions easing, but in the long run, gold's value as a diversified asset allocation is highlighted. As the Fed rate cut cycle begins, gold investment may welcome a true "golden era." Close monitoring of macroeconomic data and timely positioning to capture opportunities is recommended.

As of Beijing time 07:53, spot gold is trading at $2,645.19 per ounce.