Gold (XAUUSD) edged higher on Monday, recovering from over a two-week low as sliding US Treasury yields and Federal Reserve (Fed) rate cut bets lent support to the non-yielding yellow metal. The rebound, however, remains limited, as a modest US Dollar (USD) uptick and an improving global risk appetite cap aggressive upside momentum.
The move comes as markets brace for a heavy policy-driven week, with the release of FOMC meeting minutes on Wednesday and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium later in the week. Both events could provide fresh clarity on the Fed’s policy outlook heading into September.
Fed rate cuts back in focus
Market participants are now convinced that the Fed will resume easing its policy stance in September. According to the CME FedWatch Tool, traders are pricing in the likelihood of at least two 25-basis-point rate cuts by the end of 2025.
Last week’s softer US consumer sentiment data combined with weaker demand signals reinforced expectations of Fed action. At the same time, stronger Producer Price Index (PPI) data tempered speculation of a larger 50 bps cut, striking a balance between cautious optimism and controlled policy expectations.
The fall in US Treasury bond yields has provided a boost to Gold, which typically benefits when yields decline, as it reduces the opportunity cost of holding the non-yielding asset.
Trump-Zelenskyy meeting in spotlight
Geopolitical developments also play a pivotal role in shaping Gold’s near-term trajectory. Investors remain cautious ahead of US President Donald Trump’s meeting with Ukrainian President Volodymyr Zelenskyy, followed by discussions with European leaders on a potential peace deal with Russia.
The war in Europe, the deadliest in eight decades, continues to fuel safe-haven demand for Gold. Any breakthrough or escalation from these talks could inject significant volatility into markets, directly influencing XAUUSD positioning.
Mixed US data clouds Dollar outlook
Despite Gold’s modest gains, the US Dollar has managed to attract fresh buying interest. Friday’s US Retail Sales report showed a 0.5% monthly rise in July, following an upwardly revised 0.9% gain in June. The data underscored consumer resilience and supported the case for a still-sturdy US economy.
At the same time, the University of Michigan survey revealed rising short-term and long-term inflation expectations, with the 1-year forecast at 4.9% and the 5-year outlook at 3.9%. These figures highlight persistent price pressures that complicate the Fed’s policy path.
However, consumer confidence weakened sharply, with the Sentiment Index plunging to 58.6 from 61.7. This divergence between rising inflation expectations and falling sentiment adds another layer of uncertainty to the Fed’s September decision.
Market sentiment favors caution
While Gold has staged a recovery, investors are hesitant to chase the rally higher. The combination of softer risk-off flows and an improving equity market tone suggests that safe-haven demand may not fully dominate price action.
Market focus is squarely on this week’s Fed-driven catalysts. If the FOMC minutes and Powell’s Jackson Hole speech reinforce dovish expectations, Gold could build on its rebound and push toward higher resistance levels. Conversely, a less dovish or cautious Fed stance could reintroduce downside risks.
Technical outlook on XAUUSD
From a technical perspective, Gold remains vulnerable unless it breaks decisively above near-term resistance. The $2,350–$2,360 region is acting as a key barrier. A sustained move above this zone could open the door toward $2,400.
On the downside, the $2,300 level is a crucial psychological support, followed by last week’s two-week low near $2,280. A break below these levels could expose Gold to further downside pressure, potentially targeting $2,250.
Conclusion
Gold prices are clinging to modest recovery gains, buoyed by falling US yields and September Fed cut expectations. However, a firmer Dollar and an improving risk tone continue to cap upside momentum. Traders are cautious ahead of FOMC minutes, Powell’s Jackson Hole address, and Trump-Zelenskyy peace talks, all of which hold the potential to spark significant volatility in the Gold market.
For now, XAUUSD trades in a fragile balance between Fed policy speculation and geopolitical uncertainty, leaving traders waiting for stronger directional cues before committing to major positions.
