- Gold price stages a solid bounce from over a two-week low touched earlier this Monday.
Retreating US bond yields and Fed rate cut bets benefit the non-yielding yellow metal.
A modest USD uptick and a positive risk tone might cap further gains for the commodity.
Gold (XAU/USD) clings to modest gains through the early part of the European session on Monday, though the lack of follow-through buying warrants caution before positioning for an extension of the intraday bounce from over a two-week low. Investors turn cautious ahead of US President Donald Trump’s meeting with Ukrainian President Volodymyr Zelenskiy and European leaders to discuss a peace deal with Russia. This, along with the growing acceptance that the US Federal Reserve (Fed) will resume its rate-cutting cycle in September and sliding US Treasury bond yields, underpins the non-yielding yellow metal.
Meanwhile, traders have scaled back their bets for a more aggressive policy easing by the Fed. This assists the US Dollar (USD) in attracting some buyers at the start of a new week and acts as a headwind for the Gold price. Apart from this, the upbeat market mood further contributes to capping the upside for the safe-haven commodity. Traders also seem reluctant and opt to wait for more cues about the Fed’s rate-cut path. Hence, the focus remains on the FOMC meeting Minutes on Wednesday. This will be followed by Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium and provide some meaningful impetus to the XAU/USD pair.
Daily Digest Market Movers: Gold price benefits from safe-haven buying ahead of Trump-Zelenskyy meeting
- Traders now seem convinced that the US Federal Reserve will lower borrowing costs at its September meeting. Moreover, the CME Group’s FedWatch Tool indicates the possibility of at least two 25-basis-point Fed rate cuts by the end of this year.
- Ukrainian President Volodymyr Zelensky will meet US President Donald Trump for bilateral talks on Monday. Later, the key European leaders will be joining a larger conversation to discuss a peace deal to end Europe’s deadliest war in 80 years.
- Data released last Thursday showed that US producer prices rose in July at the fastest monthly pace since 2022 and tempered bets for a jumbo 50 bps interest rate cut by the Fed. This assists the US Dollar in attracting some buyers at the start of a new week.
- Meanwhile, the preliminary data from the University of Michigan showed that the one-year inflation expectations climbed to 4.9% from 4.5% and the five-year forecast increased to 3.9% from 3.4%, indicating a gain of momentum in price pressures.
- Additional details showed that the US Consumer Sentiment Index unexpectedly dropped to 58.6 in August from 61.7 in the previous month, signalling a poor backdrop in public confidence. Moreover, the Expectations Index eased to 57.2 from 57.7.
- Earlier, the US Census Bureau reported on Friday that the US Retail Sales increased by 0.5% on a monthly basis in July. This followed the 0.9% rise (revised up from 0.6%) recorded in the previous month and matched consensus estimates.
- Traders now look forward to the release of the FOMC meeting Minutes on Wednesday and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium during the latter part of the week for more cues about the near-term rate-cut path.
- Apart from this, geopolitical developments will play a key role in influencing demand for traditional safe-haven assets and provide some meaningful impetus to the Gold price.
Gold constructive setup backs the case for a move towards the $3,375 resistance zone
An intraday bounce from the 61.8% Fibonacci retracement level of the upswing from the July monthly low and a subsequent move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart favor the XAU/USD bulls. Moreover, oscillators on the said chart have again started gaining positive traction and back the case for a further intraday appreciating move. Some follow-through buying beyond the $3,355 area, or the 50% retracement level, will reaffirm the positive outlook and lift the Gold price to the next relevant hurdle near the $3,372-3,374 region, or the 23.6% Fibo. retracement level. The momentum could extend further and allow the commodity to reclaim the $3,400 mark before aiming to test the monthly peak, around the $3,408-3,410 area.
On the flip side, the 200-SMA on H4, around the $3,346 region, now seems to protect the immediate downside ahead of the $3,324-3,323 zone, or the 61.8% Fibo. retracement level. Failure to defend the said support levels could make the Gold price vulnerable to weaken further towards the $3,300 round figure en route to the $3,283-3,282 horizontal zone and the $3,268 region, or the late June swing low.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Source: https://www.fxstreet.com/news/gold-rebounds-from-two-week-low-ahead-of-trump-zelensky-meeting-202508180515