Gold prices (XAU/USD) saw a significant intraday recovery, surging by approximately $40 from a two-week low, spurred by optimistic monthly employment data last Friday. However, this rebound encountered resistance around the $2,064 mark, attributed to uncertainties surrounding the Federal Reserve’s (Fed) stance on interest rate cuts. Traders refrained from making bold directional bets on the non-yielding precious metal amid this uncertainty.
Investors recalibrated their expectations for an aggressive Fed policy easing, considering the resilience of the US economy and recent hawkish statements from some Federal Open Market Committee (FOMC) members. This shift supported higher US Treasury bond yields, acting as a catalyst for the US Dollar (USD) and exerting downward pressure on gold prices at the beginning of the new week. Despite this, a softer risk tone in the market might help mitigate potential losses.
Amid concerns about a sluggish economic recovery in China and escalating geopolitical tensions in the Middle East, market sentiment remained fragile. The equity markets reflected this unease, contributing to a generally weaker tone and offering some support to gold as a safe-haven asset. Traders are anticipated to exercise caution, waiting for the release of the latest US consumer inflation figures on Thursday before committing to the next directional move for the precious metal.
No significant market-moving economic data is scheduled for release from the US on Monday. The USD’s direction is expected to be influenced by a speech from Atlanta Fed President Raphael Bostic and US bond yields. The broader risk sentiment will also play a role in influencing gold prices. However, the mixed fundamental backdrop suggests a degree of caution is warranted before positioning for the potential resumption of the one-week-old downtrend.
