- Gold price drifts lower as the US-China trade truce optimism undermines safe-haven demand.
- Tuesday’s US CPI print reaffirms Fed rate cut bets and keeps the USD bulls on the defensive.
- Geopolitical risks could limit deeper losses for the XAU/USD pair, warranting caution for bears.
Gold price (XAU/USD) is exhibiting a slight downward trend in intraday trading, although the momentum lacks significant bearish conviction. The precious metal is maintaining a position comfortably above the $3,200 level as the European trading session commences on Wednesday. The prevailing positive sentiment in global markets is largely attributed to renewed optimism surrounding a potential de-escalation of the trade tensions between the United States and China. This development is perceived as a primary factor diminishing the appeal of gold as a safe-haven asset. Investors are seemingly reducing their exposure to gold in favor of riskier assets, anticipating improved global economic conditions stemming from a resolution to the trade dispute.
Concurrently, the weaker-than-anticipated Consumer Price Index (CPI) data released by the United States on Tuesday has reinforced market expectations for at least two interest rate reductions by the Federal Reserve (Fed) in 2025. The CPI reading, which measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services, came in below forecasts, suggesting that inflationary pressures are moderating. This has kept the US Dollar (USD) under pressure, trading below a one-month high reached earlier in the week. A weaker dollar typically provides some support to gold prices, as it makes the metal less expensive for holders of other currencies. However, the overall impact has been limited by the prevailing risk-on sentiment. Consequently, it is prudent to await further confirmation of selling pressure before committing to strategies anticipating more substantial declines in the non-yielding Gold price. Market participants are closely monitoring upcoming economic data releases and Fed communications for further clues regarding the future path of monetary policy.
