Gold Price Forecast: XAU/USD edges higher to near $3,700 as Fed rate decision looms

• Gold price drifts higher to near $3,695 in Wednesday's early Asian session.
• The Fed is anticipated to cut the rate by 25 bps on Wednesday. 
• Easing tensions and improved risk sentiment might cap the Gold's upside. 

The Gold price (XAU/USD) gains ground to around $3,695 during the early Asian session on Wednesday. The precious metal edges higher amid a weak US Dollar (USD) and growing expectations for multiple rate cuts by the Federal Reserve (Fed). All eyes will be on the Fed rate decision later on Wednesday. 

The Fed is widely expected to cut its key lending rate by 25 basis points (bps) at its September meeting. This would be the first rate reduction of 2025 and would lower the federal funds rate to a target range of 4.0% to 4.25%

Traders expect more rate cuts by the end of the year, as a slew of US economic data gave indications of a weak labor market and no major inflation surprises.  Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. 

"Global growth uncertainty and geopolitical risk continue to keep haven demand high, but the gold rally is being driven largely by anticipation of aggressive rate cuts from the Federal Reserve," said Zain Vawda, analyst at MarketPulse by OANDA. 

Traders will closely monitor the developments surrounding the US-China talks as the meeting between 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, continues. Any signs of easing trade tensions between the world's two biggest economies or improved risk sentiment could boost the risk sentiment, weighing on the safe-haven asset like Gold.