Gold price (XAU/USD) opened the new trading week on a weaker footing, slipping after failing to sustain above the $3,400 psychological mark during the Asian session on Monday. A rebound in global risk sentiment, fueled by optimism over potential progress in geopolitical talks, has prompted a shift away from traditional safe-haven assets, weighing on the precious metal.
Asian stock markets and US equity futures climbed in early trading amid hopes that upcoming discussions between US and Russian leaders could pave the way toward a resolution in the Ukraine conflict. This improved market tone dampened demand for gold, which often benefits during periods of heightened geopolitical or financial stress.
Fed Rate Cut Expectations Offer a Cushion
Despite the downward pressure, gold’s losses are contained as traders remain convinced the Federal Reserve will resume its rate-cutting cycle in September. Market pricing currently reflects expectations for at least two 25 basis point rate cuts by year-end, bolstered by the July Nonfarm Payrolls report, which revealed further softening in US labor market conditions.
St. Louis Fed President Alberto Musalem’s comments last Friday reinforced this outlook, warning that the Fed risks missing both inflation and employment objectives, with downside risks particularly acute for jobs. Fed Governor Michelle Bowman also noted that weak labor market data validated her view that three cuts this year may be appropriate.
Lower interest rates tend to reduce the opportunity cost of holding non-yielding assets like gold, potentially keeping the metal supported even when risk sentiment improves.
Trade and Geopolitical Uncertainty Still in Play
While optimism around US-Russia talks weighed on gold, broader geopolitical and trade risks remain supportive. The looming August 12 expiration of the US-China tariff truce injects uncertainty into the market, as a failure to extend the agreement could escalate trade tensions.
In addition, investors are monitoring US-Russia bilateral discussions on Ukraine. Any setback or negative headline from these talks could quickly reignite safe-haven demand for gold, reversing its current bearish tone.
Key US Inflation Data in Focus
The macroeconomic spotlight this week falls on US inflation readings. The Consumer Price Index (CPI) release on Tuesday and Producer Price Index (PPI) on Thursday will provide crucial clues on the Fed’s rate path. Softer-than-expected inflation could strengthen the case for multiple rate cuts, potentially boosting gold prices, while hotter readings may dampen dovish expectations and put pressure on the yellow metal.
Market participants will also pay close attention to speeches from key FOMC policymakers, which could offer further insight into how the Fed is weighing inflation risks against labor market weakness.
Technical Outlook: $3,370 Support in Focus
From a technical perspective, gold faces immediate resistance at the $3,400 handle, followed by $3,420 and $3,450. On the downside, initial support lies near $3,370, which, if broken, could expose $3,350 and $3,320 levels.
The daily Relative Strength Index (RSI) remains in neutral territory, suggesting there is room for both upward and downward movement depending on incoming data and headlines. A sustained break above $3,400 could reestablish bullish momentum, while a decisive move below $3,350 would tilt the bias toward deeper correction.
Conclusion
Gold’s early-week weakness reflects improved market sentiment and reduced safe-haven demand, but the metal’s downside remains limited by strong Fed rate cut expectations and lingering trade geopolitical uncertainty. The upcoming US inflation releases will be pivotal in determining whether gold resumes its push toward recent highs or retreats toward deeper technical support levels.
