Gold Price Forecast: XAU/USD drifts higher to near $3,650 as Fed is expected to cut rates

• Gold price trades on a stronger note around $3,640 in Monday's early Asian session. 
• Markets expect the Fed to cut its interest rate on Wednesday. 
• The US-China meeting heads into the second day focused on trade and economy. 

The Gold price (XAU/USD) edges higher to near $3,640 during the early Asian session on Monday. The yellow metal gains traction as a weakening US labor market reinforces expectations that the Federal Reserve (Fed) will deliver its first rate cut of the year this week.

The US central bank is anticipated to deliver a quarter-point rate cut at its September meeting on Wednesday, with a small potential for a 50 basis points (bps) move amid signs US job growth is slowing rapidly. 

Markets have also priced in rate reductions continuing deep into 2026 to ward off a recession. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. 

"Weaker employment and spotty inflation... priced in with the Fed having to cut rates is pushing metals higher because there is the risk of longer-term inflation," said Daniel Pavilonis, senior market strategist at RJO Futures.

US and Chinese representatives, helmed by US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer and a Chinese official led by Vice Premier He Lifeng, discussed trade and the economy during high-level talks in Madrid. Traders will closely monitor the developments surrounding the US-China talks as the meeting heads into the second day. Any signs of easing trade tensions between the world's two biggest economies could boost the risk sentiment, weighing on the safe-haven asset like Gold.