Gold (XAUUSD) held modest intraday gains in the Asian session on Tuesday, trading just above the one-week low touched on Monday. The rebound comes after a sharp 1.65% drop in the prior session, driven largely by easing geopolitical tensions and renewed US Dollar demand.
While recent US data including weaker Nonfarm Payrolls has bolstered expectations for the Federal Reserve to begin rate cuts in September, traders are hesitant to commit to fresh long positions ahead of Tuesday’s US Consumer Price Index (CPI) release. The inflation data will be critical for shaping the Fed’s September policy path.
Fed Rate Cut Bets Cushion USD Strength
Market consensus now points to a 25 basis point Fed rate cut next month, with at least two more reductions expected before year-end. This dovish shift follows a string of softer US economic indicators, including a slowdown in job growth and mixed manufacturing activity.
Ordinarily, such expectations would weigh more heavily on the US Dollar, but geopolitical optimism has limited the greenback’s downside. The USD’s inability to extend its recent gains is offering mild support to gold, which thrives when real yields fall and the dollar softens.
Geopolitical Calm Reduces Safe-Haven Demand
Monday’s weakness in gold was amplified by news that US President Donald Trump signed an executive order extending the US-China trade truce for another three months. Additionally, markets are eyeing Friday’s planned US-Russia summit, which could signal progress toward ending the Ukraine conflict.
These developments have reduced safe-haven demand for gold, especially as equity markets maintain a risk-on tone. For gold bulls, this creates a balancing act: Fed rate cut expectations offer support, but reduced geopolitical risk tempers buying interest.
Key Data and Events Ahead
Traders are positioning cautiously ahead of:
US CPI (Tuesday) Expected to reveal whether inflationary pressures are cooling fast enough for the Fed to ease sooner.
The US PPI (Thursday) Another inflation gauge that could reinforce or challenge the CPI’s message.
US Retail Sales & Michigan Sentiment (Friday) Indicators of consumer strength that could influence Fed thinking.
FOMC Speeches Several policymakers are scheduled to speak, potentially offering more clues on the Fed’s next move.
Technical Analysis: XAUUSD Remains Range-Bound
Gold’s technical picture remains neutral to slightly bearish in the short term:
Immediate resistance: $2,360 – A break above this zone could open the door to $2,375, where the 50-day EMA aligns.
Immediate support: $2,340 – A decisive break below may lead to a retest of $2,320, the one-week low.
Momentum indicators: RSI remains mid-range, showing no extreme overbought or oversold conditions.
For bulls, a sustained close above $2,375 would be needed to shift momentum back in their favor, while bears will look for a drop below $2,320 to extend downside potential.
Conclusion: Caution Ahead of CPI Keeps Gold in Tight Range
Gold prices are holding steady, supported by Fed rate cut expectations and capped by improving geopolitical sentiment. Traders will likely avoid major moves until after the CPI data confirms or challenges the current rate cut outlook. A softer-than-expected CPI could ignite a gold rally toward $2,375, while a hotter print may send prices back toward $2,320.
