Gold prices (XAU/USD) are holding onto modest intraday gains during Tuesday’s Asian session but remain near Monday’s one-week low. The lack of strong upside momentum comes as traders await fresh catalysts, particularly the upcoming US consumer inflation report.
Market sentiment has increasingly priced in the likelihood that the US Federal Reserve will restart its rate-cut cycle in September. This expectation has limited the US Dollar’s ability to extend the gains seen over the past two days, offering some support to the non-yielding yellow metal. However, gold bulls appear hesitant to take large positions ahead of key data releases.
Cautious Trading Ahead of CPI
The latest CPI figures are expected to offer clearer direction on the Fed’s monetary policy path. The data will influence USD demand and could set the tone for gold’s next move. Meanwhile, optimism surrounding a US-China trade truce extension and an upcoming US-Russia summit aimed at resolving the Ukraine conflict may act as headwinds for the safe-haven asset.
Market Drivers
On Monday, gold prices dropped sharply as easing geopolitical tensions reduced demand for traditional safe havens. Hopes that Friday’s US-Russia summit could move closer to ending the prolonged Ukraine war, along with renewed USD strength, drove the metal down by roughly 1.65% overnight.
Traders are still broadly betting on a 25-basis-point Fed rate cut in September, with expectations for at least two cuts before year-end. These projections were reinforced by recent soft US economic data, including the disappointing Nonfarm Payrolls report, which pointed to a potential slowdown in economic momentum.
While the USD struggled to extend its recovery on Tuesday, this provided some relief to gold. Nonetheless, market participants are refraining from aggressive trades until CPI data confirms the next policy direction.
Key Events to Watch This Week
Beyond the CPI report, the US Producer Price Index (PPI) will be released on Thursday, followed by monthly Retail Sales and the University of Michigan Consumer Sentiment Index on Friday. Speeches from several Federal Open Market Committee (FOMC) members will also be closely monitored for policy clues.
Trade Developments
In trade news, US President Donald Trump signed an executive order on Monday to extend the trade truce with China for three more months, easing fears of escalating tensions between the world’s two largest economies. Trump also stated via social media that gold would not be subject to tariffs, although no further details were provided.
