Gold (XAU/USD) faced fresh selling pressure during early European trading hours on Monday, erasing part of Friday’s gains. This decline follows the Federal Reserve’s hawkish shift, reducing the forecasted number of rate cuts this year from three to one. This stance has bolstered U.S. Treasury bond yields and strengthened the U.S. dollar, which remains near its highest level since early May. The robust dollar is a significant factor drawing investments away from the non-yielding gold.
Despite this, the possibility of two Fed rate cuts in 2024 persists, owing to signs of easing inflationary pressures in the U.S. This expectation is preventing aggressive bullish bets on the dollar, providing some support to gold prices. Additionally, ongoing geopolitical tensions in the Middle East and political uncertainty in Europe are helping to limit losses for the safe-haven asset.
Given these mixed signals, it would be prudent to wait for sustained selling pressure before predicting a continuation of gold’s pullback from its all-time high reached in May.
