Gold prices are encountering resistance at the critical $1,930 level, retreating from their one-week high established earlier this Monday. Although XAU/USD manages to sustain a positive trajectory for the second consecutive day, it now hovers around the $1,925 range, registering a modest gain of slightly over 0.10% during the initial half of the European session.
The US Dollar (USD) is undergoing a defensive phase, remaining below its highest point in more than half a year, which occurred last week. This trend is providing some support to gold prices. Additionally, concerns surrounding a potential United States (US) government shutdown and the deteriorating property market in China are bolstering the appeal of this safe-haven asset. Notably, China Evergrande Group has postponed its decision regarding debt restructuring, with reports emerging of police detaining employees from the troubled developer’s wealth management unit in southern China. These developments align with China’s cautious approach to implementing stimulus measures, tempering investors’ appetite for riskier assets.
Meanwhile, the downside pressure on the USD is being moderated as traders exercise caution, preferring to await the Federal Reserve’s (Fed) upcoming monetary policy update. This prudent approach limits significant upward movement in the US Dollar-denominated gold prices. The Fed is scheduled to release its decision following a two-day monetary policy meeting on Wednesday, with the consensus expectation being the maintenance of the status quo. However, market dynamics continue to factor in the possibility of a 25 basis points (bps) interest rate hike by the end of the year, either in November or December. Consequently, all eyes will remain fixed on the accompanying monetary policy statement.
Furthermore, investors will closely analyze Fed Chair Jerome Powell’s remarks during the post-meeting press conference, seeking fresh insights into the future path of rate hikes. These insights will significantly influence short-term USD price dynamics and breathe new life into the gold market. This week, market participants will also grapple with interest rate decisions from several major central banks, including the Swiss National Bank (SNB) and the Bank of England (BoE) on Thursday, followed by the Bank of Japan (BoJ) on Friday. In addition, the release of the latest consumer inflation figures from Canada and the United Kingdom (UK) on Tuesday and Wednesday, respectively, may generate trading opportunities within the XAU/USD pair.