The price of gold (XAU/USD) has seen a modest recovery from its recent one-week low early on Monday, yet it continues to trade in negative territory during the first half of the European session. The ongoing struggle of the US Dollar (USD) to gain significant momentum amid uncertainties surrounding the Federal Reserve’s (Fed) rate-cut path has contributed to some support for the safe-haven precious metal, alongside a softer risk tone and geopolitical tensions.
Despite this, the upside potential for gold remains limited due to growing expectations that the Fed will maintain its stance on higher-for-longer interest rates in order to combat inflation. This hawkish outlook has bolstered US Treasury bond yields, posing as a potential headwind for the non-yielding yellow metal.
Furthermore, traders appear cautious and hesitant to take aggressive directional positions ahead of the highly-anticipated FOMC decision, scheduled to be announced on Wednesday. The outcome of this decision could have significant implications for the trajectory of interest rates and market sentiment, influencing the direction of gold prices in the near term. As a result, market participants are likely exercising caution and closely monitoring developments in order to position themselves accordingly amidst the prevailing uncertainty.
