Gold prices (XAU/USD) encountered fresh selling pressure during early European trading hours on Tuesday, partially reversing the previous day’s modest recovery from the $2,287 level, which marked a one-month low triggered by positive US jobs data. This data has led investors to scale back their expectations for a near-term interest rate cut by the Federal Reserve (Fed) in September. The resultant effect has been elevated US Treasury bond yields, bolstering the US Dollar (USD), which hovers near a multi-week high reached on Monday, subsequently undermining demand for the precious metal.
Additionally, the People’s Bank of China (PBoC) significantly reduced its gold purchasing activities in May, ending a one-and-a-half-year-long buying streak and further contributing to the downward pressure on gold prices. Despite these bearish factors, political uncertainty in Europe and broader geopolitical risks are expected to provide some support, limiting deeper losses in gold prices.
Market participants are now likely to adopt a cautious stance, awaiting key economic indicators due later this week. The upcoming release of the latest US consumer inflation figures and the Federal Open Market Committee (FOMC) decision on Wednesday are particularly crucial. These events will provide clearer guidance on the Fed’s future rate policies and, consequently, the near-term direction for the non-yielding yellow metal.
