During the Asian session on Tuesday, Gold prices (XAU/USD) encountered renewed selling interest, retracing previous gains and approaching the pivotal 50-day Simple Moving Average (SMA) resistance. The resurgence in US Dollar (USD) strength, bolstered by expectations surrounding Federal Reserve (Fed) interest rate cuts, played a significant role in pushing the precious metal lower. Additionally, a positive sentiment in equity markets diverted investments away from safe-haven assets like Gold.
Market sentiment has increasingly priced in the likelihood of Fed rate cuts in September and potentially again in December. This sentiment was reinforced by the latest US ISM PMI data released on Monday, indicating continued contraction in the manufacturing sector and declining input prices, which could limit upward movement in US Treasury bond yields and potentially cap gains for the USD. Meanwhile, ongoing concerns over China’s economic stability, geopolitical tensions, and political uncertainties globally provided some support to Gold prices.
Traders adopted a cautious stance ahead of key events including Fed Chair Jerome Powell’s speech later in the day, the release of FOMC meeting minutes on Wednesday, and the upcoming Nonfarm Payrolls (NFP) report on Friday. These data points are expected to shape market expectations regarding the Fed’s future monetary policy decisions, thereby influencing sentiment towards the USD and guiding the next potential move for Gold.
