- Optimism in the market appears to be diminishing the appeal of gold, hindering bullish momentum.
- Strong US economic figures released on Thursday are bolstering the dollar, which in turn is restricting gains for gold.
- Ongoing global tensions and expectations of Federal Reserve interest rate reductions should provide a floor for the XAU/USD exchange rate.
The price of gold (XAU/USD) is experiencing some selling pressure after reaching the $3,370-3,371 level during Friday’s Asian trading session, partially offsetting the gains made the previous day. Optimism surrounding a possible easing of trade tensions between the United States and China continues to foster a positive risk sentiment, which is diminishing the demand for the safe-haven asset. Additionally, renewed buying interest in the US Dollar (USD) is contributing to the downward pressure on the commodity.
However, indications from Federal Reserve (Fed) policymakers suggest a readiness to consider potential interest rate cuts, which could limit the dollar’s appreciation and provide support for the price of gold, as it does not offer a yield. Moreover, continuing geopolitical risks may further help to constrain the potential for declines in the XAU/USD pair. Therefore, it would be advisable to await significant sustained selling before anticipating a continuation of the corrective decline from the $3,500 psychological level, or the record high, observed earlier this week.
