In the first half of the European session on Tuesday, the price of gold (XAU/USD) faced challenges in capitalizing on its intraday positive movement, remaining below the $2,040-$2,042 supply zone. The delay in expectations for the first Federal Reserve (Fed) rate cut until May, fueled by robust US macro data indicating a healthy economy, has exerted pressure on the precious metal. Additionally, a surge in US Treasury bond yields is acting as a headwind, given gold’s non-yielding nature.
Despite these factors, geopolitical tensions in the Middle East are providing a downside cushion for gold, as the metal retains its status as a safe-haven asset. A modest decline in the US Dollar to a one-week low, spurred by a rise in the Japanese Yen post-Bank of Japan (BoJ) decisions, is expected to provide some support to gold prices. Traders, however, may exercise caution, awaiting key macro releases later in the week, including global flash PMIs on Wednesday, and the US Q4 GDP and Core PCE Price Index on Thursday and Friday, respectively.
The upcoming European Central Bank (ECB) policy decision on Thursday is anticipated to inject volatility into the markets, potentially influencing gold prices. Meanwhile, short-term trading opportunities may arise on Tuesday with the release of the Richmond Manufacturing Index, alongside monitoring US bond yields, USD price dynamics, and broader risk sentiment. However, the mixed fundamental backdrop suggests a cautious approach for traders contemplating aggressive directional bets on XAU/USD.
