Gold prices (XAU/USD) continued their downward trajectory on Tuesday, adding to the significant losses incurred the previous day, marking the largest daily decline since June 2022. The precious metal remained under selling pressure for the second consecutive day as fears of a broader conflict in the Middle East diminished, contributing to a generally positive risk sentiment in the market. This shift away from safe-haven assets like gold was further fueled by reduced expectations of interest rate cuts by the Federal Reserve (Fed), which bolstered the US dollar (USD) and pushed gold to its lowest level in over two weeks.
Despite the downward pressure, speculation that major central banks may implement interest rate cuts later this year helped gold prices recover from intraday lows below $2,300. Traders exhibited caution and refrained from making aggressive bets, instead opting to await the release of flash PMI prints to gauge global economic health, a factor that influences demand for traditional safe-haven assets like gold. Additionally, market participants will closely monitor the upcoming release of the Advance US Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index later in the week for further insights into the economic landscape.
As the market continues to digest geopolitical developments and central bank policy outlooks, gold prices are likely to remain sensitive to shifts in risk sentiment and fluctuations in the US dollar. Traders will remain vigilant for any signs of renewed geopolitical tensions or changes in central bank rhetoric that could impact the trajectory of gold prices in the near term.
