Gold prices (XAU/USD) are struggling to gain significant traction on Monday, trading within a narrow band below the $2,330 mark during the early European session. This lack of movement is attributed to traders’ hesitancy to make aggressive bets amid ongoing uncertainty regarding the Federal Reserve’s (Fed) rate-cut trajectory.
Recent US inflation data released on Friday reinforced market expectations that the Fed might cut interest rates in September and again in December. However, recent hawkish comments from several influential Federal Open Market Committee (FOMC) members have indicated that the central bank is not in a hurry to reduce interest rates, contributing to the current subdued price action in gold.
Meanwhile, the US Dollar (USD) is experiencing a corrective pullback from a two-month peak following the US Personal Consumption Expenditures (PCE) data, which is providing some support to gold prices. Additionally, persistent geopolitical tensions and uncertainty surrounding France’s unexpected snap election outcome are bolstering the yellow metal’s appeal as a safe haven.
However, the increasing likelihood of a Trump presidency, which raises concerns about the imposition of aggressive tariffs, could potentially fuel inflation and lead to higher interest rates. This scenario is driving US Treasury bond yields to multi-week highs, thereby limiting any significant upside potential for the non-yielding gold.
Overall, gold prices are caught in a balancing act between supportive factors such as a weaker USD and geopolitical concerns, and limiting factors like potential higher interest rates and strong US Treasury yields.
