During early European trading hours on Monday, the price of gold (XAU/USD) showed signs of recovery, attracting interest from dip-buyers following a recent retracement from a two-week peak reached on Friday. Despite a surprising stance from the Federal Reserve (Fed), which indicated expectations for only one rate cut in 2024, market sentiment continues to price in the possibility of two rate reductions this year amidst indications of easing inflationary pressures. This perception has contributed to a decline in US Treasury bond yields, alongside a cautious market sentiment, geopolitical tensions, and political uncertainties in Europe, collectively bolstering demand for the safe-haven asset.
On the other hand, the US Dollar (USD) has strengthened, buoyed by stronger-than-anticipated US PMI figures released last Friday, which underscored the resilience of the American economy. This has propelled the USD to its highest level since May 9, exerting pressure on gold prices and limiting their upward potential. Market participants appear hesitant, choosing to remain on the sidelines ahead of significant upcoming US economic data releases this week, including the final Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index. Additionally, investors are closely monitoring statements from influential Federal Open Market Committee (FOMC) members for potential short-term trading opportunities.
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