During the early European session on Tuesday, the gold price (XAU/USD) struggled to maintain upward momentum, experiencing a slight decline from its recent multi-day low around the $2,325-2,324 mark. Despite an initial positive move, the precious metal faced resistance as the US Dollar (USD) surged to its highest level since November, buoyed by diminishing expectations of a Federal Reserve (Fed) rate cut.
The prevailing sentiment among investors reflects growing confidence in the Fed’s commitment to maintaining higher interest rates amidst signs of persistent inflation and a resilient US economy. This has led to sustained USD buying pressure, thereby exerting downward pressure on gold, which is denominated in USD. However, a significant corrective decline in gold prices remains elusive at this stage.
Geopolitical uncertainties, particularly concerning the ongoing conflicts in the Middle East, continue to linger, lending support to gold as a safe-haven asset. Despite the current weakness in equity markets, which reflects investor concerns over geopolitical risks, the impact on gold prices has been somewhat mitigated by the prevailing USD strength.
Moreover, market expectations of potential interest rate cuts by major central banks later in the year could provide some support to gold prices, as investors seek refuge in non-yielding assets like gold.
Looking ahead, market participants are closely monitoring US macroeconomic data releases and speeches by influential Federal Open Market Committee (FOMC) members, including Fed Chair Jerome Powell, for fresh insights that could influence the direction of the XAU/USD pair. As uncertainty prevails in global markets, gold’s status as a safe-haven asset is likely to continue attracting investor attention, albeit amidst ongoing fluctuations influenced by USD dynamics and geopolitical developments.
