Despite Moody’s unexpected downgrade of the U.S. sovereign credit rating to “Aa1” last Friday—citing the nation’s ballooning debt—global risk appetite remained strong. Investors appeared more focused on the 90-day pause in trade tensions between the U.S. and China, boosting equities and limiting interest in gold.
While expectations persist that the Federal Reserve may cut interest rates further in 2025 due to soft inflation data and sluggish retail sales, the U.S. dollar failed to gain traction. Still, the declining greenback offered little support to gold, which lacks yield and typically benefits from dollar weakness. Geopolitical tensions have also failed to drive significant safe-haven flows into gold, signaling bearish sentiment in the near term.
Fed Signals Caution Amid Mixed Economic Outlook
Market pricing now reflects rising expectations of at least two rate cuts by the Fed in 2025. However, commentary from Federal Reserve officials has been mixed. Atlanta Fed President Raphael Bostic noted that inflation is not easing as quickly as expected and leaned toward only one rate cut this year. He emphasized the importance of trade policy outcomes in shaping monetary decisions.
New York Fed President John Williams acknowledged the strength of recent economic data and labor market balance but warned of persistent uncertainties. Similarly, Fed Vice Chair Philip Jefferson cautioned about potential inflationary effects from tariffs and emphasized maintaining policy to ensure inflation expectations remain stable.
Minneapolis Fed President Neel Kashkari echoed concerns over trade-related uncertainty, attributing a decline in investor sentiment to the unpredictability surrounding U.S. tariff policies. He endorsed the Fed’s cautious “wait-and-see” approach.
Geopolitical Developments in Focus
On the international front, Israeli forces have intensified operations in Khan Yunis, aiming to pressure Hamas into agreeing to a temporary ceasefire. Prime Minister Benjamin Netanyahu stated that Israel intends to assert full control over Gaza.
Simultaneously, former U.S. President Donald Trump announced on his Truth Social platform that Russia and Ukraine have agreed to begin ceasefire negotiations. Trump said the agreement followed separate discussions with both leaders and that terms will be determined through direct talks between the two nations.
Technical Outlook: Key Support at $3,200 Under Threat
From a technical standpoint, gold (XAU/USD) appears vulnerable following a failed attempt to break above the 200-period Simple Moving Average on the 4-hour chart. Bearish signals from technical indicators suggest a possible breakdown below the critical $3,200 support level.
Should this level fail to hold, gold could slide toward the $3,178–$3,177 support area, with further downside risks extending to the $3,120 and $3,100 levels. A breach of $3,100 could expose gold to additional losses, potentially targeting support near $3,060.
Conversely, resistance is expected around the $3,250–$3,252 zone. A sustained break above this barrier may signal a potential bottom, paving the way for recovery toward $3,275 and potentially $3,300. A decisive move past $3,300 could shift the near-term outlook back in favor of bullish traders.
No Key U.S. Data on Deck
With no major U.S. economic releases scheduled for Tuesday, traders are likely to focus on remarks from Federal Open Market Committee (FOMC) members and ongoing trade-related developments. These factors could influence risk sentiment and drive short-term movements in gold prices.
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