During the first half of the European trading session on Tuesday, the price of gold (XAU/USD) experienced a steady decline, dropping to a multi-day low around the $2,315 level. This descent was primarily driven by a resurgence in the US Dollar (USD), which reversed its previous day’s losses and approached a two-week high amid expectations that the Federal Reserve (Fed) will maintain higher interest rates for an extended period due to persistent inflation pressures. Additionally, easing geopolitical tensions in the Middle East contributed to a reduction in demand for safe-haven assets like gold.
Despite the downward movement, downside momentum for gold appears to be tempered as traders exercise caution ahead of the pivotal two-day Federal Open Market Committee (FOMC) meeting commencing on Tuesday. The upcoming US Nonfarm Payrolls (NFP) report is anticipated to provide insights into the Fed’s approach to interest rate adjustments, consequently influencing USD demand and shaping the short-term trajectory for gold, a non-yielding asset.
In the interim, market participants are eyeing the release of the Chicago Purchasing Managers’ Index (PMI) and the Conference Board’s US Consumer Confidence Index on Tuesday for potential market catalysts that could impact the XAU/USD pair. These data releases may provide additional direction amidst the current market dynamics.
