Gold prices (XAU/USD) faced challenges in sustaining early European session gains beyond the $2,400 mark on Monday, though they managed to remain in positive territory for the second consecutive day. The recent US Personal Consumption Expenditures (PCE) Price Index data, released on Friday, indicated a modest rise in inflation for June. This bolstered expectations for an imminent start to the Federal Reserve’s (Fed) rate-cutting cycle, leading to a decline in US Treasury bond yields. Consequently, the US Dollar (USD) weakened, providing support for the non-yielding yellow metal.
Geopolitical tensions, particularly conflicts in the Middle East, also contributed to the safe-haven demand for gold. However, the metal’s upside potential remains limited due to a positive mood in global equity markets, which tends to reduce the appeal of traditional safe-haven assets like gold.
Traders are cautious ahead of the Federal Open Market Committee (FOMC) meeting set to conclude on Wednesday. The outcome of this meeting, along with key US macroeconomic data releases at the start of the new month, including the Nonfarm Payrolls (NFP) report, is expected to provide fresh direction for gold prices.
