During the first half of the European session, the price of gold (XAU/USD) has sustained a downward trajectory, hovering just above the $2,350 mark, representing a one-week low observed earlier on Monday. The prevailing global risk sentiment has received a boost amid indications that tensions between Iran and Israel are unlikely to escalate further. This sentiment shift is evidenced by a generally positive tone in equity markets.
The positive outlook in equity markets, coupled with expectations of prolonged higher interest rates by the Federal Reserve (Fed) amidst persistent inflationary pressures, has exerted downward pressure on the safe-haven appeal of gold.
Despite this downward pressure, a substantial corrective decline in gold prices appears elusive, primarily due to the growing consensus that major central banks will resort to interest rate cuts later in the year. This expectation serves as a potential tailwind for gold prices, given its status as a non-yielding asset.
Furthermore, traders are exhibiting a cautious approach, opting to await the release of key US macroeconomic data scheduled for this week, including the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index, before making significant directional bets. This prudent stance suggests that strong follow-through selling would be required to confirm any potential top-out in the XAU/USD pair.
