Gold prices (XAU/USD) faced challenges in maintaining momentum during the Asian trading session on Tuesday, despite holding above a low not seen in over a week. The market’s cautious optimism was buoyed by US President Joe Biden’s unexpected decision to withdraw from the 2024 Presidential race, which has increased the likelihood of Donald Trump’s return to office. This development has sparked expectations of a potentially less stringent regulatory environment, which could influence market dynamics.
Additionally, the People’s Bank of China’s (PBoC) unexpected interest rate cuts on Monday have contributed to a generally positive market sentiment. However, these factors have created a challenging environment for gold, which is traditionally viewed as a safe-haven asset.
Despite these headwinds, expectations of a dovish stance from the Federal Reserve (Fed) may help mitigate gold’s losses. Market participants anticipate that the US central bank will begin reducing borrowing costs in September, with projections for two additional rate cuts by the end of the year. This has resulted in a decline in US Treasury bond yields, placing pressure on the US Dollar (USD) and providing support for gold.
In summary, while gold faces current challenges, including regulatory shifts and international monetary policy changes, it remains supported by expectations of a more accommodative Fed. Investors may need to observe further market movements before committing to a longer-term strategy in response to recent price fluctuations.
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