Gold prices (XAU/USD) have entered negative territory during Tuesday’s European session, losing part of the previous day’s recovery gains from the $2,315-$2,314 range, a three-week low. Despite the current downturn, expectations that the Federal Reserve (Fed) will cut interest rates later this year have provided some support. These expectations were reinforced by disappointing US macroeconomic data released on Monday, which has also weakened the US Dollar (USD) to a near two-month low. This dollar weakness continues to act as a tailwind for gold, a non-yielding asset.
Furthermore, persistent geopolitical risks contribute to a positive short-term outlook for gold prices, supporting the potential for further appreciation. As a result, any subsequent decline in gold prices might be seen as a buying opportunity, likely limiting the extent of any downside. Many traders are adopting a cautious stance, choosing to wait for other significant US macroeconomic releases later this week, particularly the Nonfarm Payrolls (NFP) report on Friday.
Additionally, upcoming central bank events are expected to impact the XAU/USD. The Bank of Canada (BoC) decision on Wednesday and the European Central Bank (ECB) meeting on Thursday are key events that could provide momentum and help shape the near-term trajectory of gold prices.
