During early European trading hours, the price of gold (XAU/USD) faced renewed selling pressure, partially retracing gains made on Friday in response to surprising hawkish signals from the Federal Reserve (Fed). The central bank revised its projections, indicating a reduction in anticipated interest rate cuts for the year from three to just one, a move that bolstered US Treasury bond yields. Consequently, the US Dollar (USD) has strengthened, reaching its highest level since early May on Friday. This appreciation has diverted investor interest away from gold, traditionally viewed as a non-yielding asset.
However, despite the Fed’s hawkish stance, the possibility of two rate cuts in 2024 remains viable due to indications of easing inflationary pressures within the United States. This tempered bullish sentiment towards the USD, thereby providing some support to gold prices. Additionally, ongoing geopolitical tensions in the Middle East and political uncertainties in Europe are expected to limit losses for the precious metal, often sought as a safe-haven during periods of global instability.
Market analysts suggest exercising caution before anticipating further declines in XAU/USD, especially following its retreat from the record highs observed in May. Observing additional selling pressure could provide clearer signals for market participants looking to re-enter positions.
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