Gold Price Forecast: XAU/USD remains capped under $3,400 ahead of US inflation data

• Gold price edges lower to around $3,390 in Monday's early Asian session. 

• Rising Fed rate cut expectations might create a tailwind for Gold. 

• China's central bank extended gold purchases to its ninth straight month in July. 

The Gold price (XAU/USD) attracts some sellers to near $3,390 during the early Asian session on Monday. The precious metal drifts lower amid a modest recovery in the US Dollar (USD). Traders brace for the release of the US inflation report, which is due later on Tuesday. 

A firmer Greenback and a broader risk-on sentiment undermine the USD-denominated commodity price, capping the price below the key psychological barrier at $3,400. Nonetheless, rising bets for a September rate cut by the US Federal Reserve (Fed) could provide some support to the non-yielding yellow metal. 

Fed Governor Michelle Bowman said on Saturday that recent weak job data underscores her concerns about labor market fragility and strengthens her confidence in her projection that three interest-rate cuts will likely be appropriate in 2025. Traders are now pricing in nearly an 89% chance of a Fed rate reduction in September, with at least two rate cuts priced in by the end of the year.

Additionally, the People's Bank of China (PBOC) added gold to its reserves in July, its ninth consecutive month of purchases, official data showed on Thursday. This headline might contribute to the precious metal’s upside. "Continued purchases by one of the world's largest central banks signal strong underlying demand for gold," said Zain Vawda, analyst at MarketPulse by OANDA.