Gold prices (XAU/USD) are having difficulty capitalizing on gains from the Asian session on Tuesday, although they are managing to stay above a more than one-week low reached the previous day. The withdrawal of US President Joe Biden from the 2024 presidential race has increased the likelihood of Donald Trump winning the presidency, which has raised expectations for a more relaxed regulatory environment. Additionally, unexpected interest rate cuts by the People’s Bank of China (PBoC) on Monday have bolstered market sentiment, posing a challenge for gold, traditionally viewed as a safe-haven asset.
Despite these pressures, dovish expectations for the Federal Reserve (Fed) are likely to limit further losses for gold. Market participants are increasingly confident that the Fed will begin lowering borrowing rates in September and are factoring in the possibility of two more rate cuts by the end of the year. This anticipation has led to a decline in US Treasury bond yields, putting the US Dollar (USD) bulls on the defensive and providing support for gold.
Given the current dynamics, it may be prudent to wait for further indications of sustained selling before considering an extension of the recent pullback from gold’s all-time highs.
