- Gold price is finding it difficult to build upon the gains it secured over the preceding two trading sessions.
- Growing optimism surrounding the upcoming US-China trade negotiations is currently dampening demand for the precious metal as a safe haven.
- Market participants are now keenly awaiting the Federal Open Market Committee (FOMC) policy announcement for clearer directional signals.
The price of gold (XAU/USD) is experiencing a notable pullback from the two-week peak it reached the day before, as news of US-China trade discussions scheduled to take place in Switzerland this week bolsters investor sentiment and diminishes the appeal of traditional safe-haven investments. Concurrently, strategic portfolio adjustments ahead of the pivotal central bank event are providing a tailwind for the US Dollar (USD), which is attracting renewed buying interest after a three-day decline, thereby adding further downward pressure on gold prices.
However, USD bulls appear hesitant to commit to substantial positions, preferring to remain on the sidelines until they receive more definitive indications regarding the Federal Reserve’s (Fed) future course of action concerning interest rate reductions. This cautious stance, coupled with ongoing geopolitical uncertainties arising from the prolonged Russia-Ukraine conflict and the volatile situation in the Middle East, should provide some underlying support for gold prices. Consequently, it would be advisable to await the outcome of the highly anticipated two-day FOMC monetary policy meeting concluding this Wednesday. The market widely expects the Fed to hold interest rates steady at this meeting, but the focus will be on the accompanying statement and press conference for clues about the central bank’s intentions for the remainder of the year, particularly in light of recent inflation data and economic growth indicators. Recent economic data has shown a mixed picture, with inflation remaining stubbornly above the Fed’s 2% target, while economic growth has been robust. This creates a dilemma for the Fed, as raising rates further could risk slowing down the economy, while cutting rates too soon could lead to a resurgence of inflation.
