Gold prices (XAU/USD) found some support near the $3,200 mark on Monday, recovering slightly from earlier losses as the U.S. dollar weakened to its lowest level in nearly two weeks. Despite the uptick, the precious metal remains under pressure, constrained by broader market optimism and limited demand for safe-haven assets.
The softening dollar comes amid growing expectations that the Federal Reserve will implement additional interest rate cuts in 2025. Following last week’s release of weaker-than-expected U.S. inflation and retail sales data, market participants are increasingly pricing in at least two rate reductions next year. The prospect of lower rates has weighed on the dollar, lending support to non-yielding assets like gold.
Nevertheless, risk-on sentiment — buoyed by a 90-day trade truce between the U.S. and China and renewed hopes for a ceasefire between Russia and Ukraine — continues to limit gold’s upside potential. Analysts suggest that investor optimism surrounding geopolitical developments has reduced the appeal of traditional safe-haven assets, including gold.
Adding complexity to the market outlook, Moody’s downgraded the United States’ sovereign credit rating by one notch to “Aa1” last Friday, citing long-term debt sustainability concerns. However, the move had little impact on global risk appetite, as positive trade news helped offset investor anxiety.
Fed Officials Offer Mixed Signals
Federal Reserve officials delivered mixed messages regarding the future of monetary policy. Atlanta Fed President Raphael Bostic struck a cautious tone, warning that inflation is not retreating as quickly as anticipated and suggesting that only one rate cut may be appropriate this year. Similarly, Fed Vice Chair Philip Jefferson highlighted uncertainty over the inflationary impact of tariffs, noting that the labor market response remains unclear.
New York Fed President John Williams described current economic indicators as strong but emphasized that “uncertainty” remains a key theme. He noted the economy is broadly balanced, and monetary policy is well-positioned for now.
Meanwhile, Minneapolis Fed President Neel Kashkari pointed to lingering investor unease driven by trade policy instability, supporting a wait-and-see approach from the central bank.
Geopolitical Developments in Focus
On the geopolitical front, the Israeli military has launched a new operation in the southern Gaza city of Khan Yunis, issuing evacuation orders as it intensifies pressure on Hamas to agree to a temporary ceasefire. Israeli Prime Minister Benjamin Netanyahu reiterated that the Israeli Defense Forces aim to establish control over the entire Gaza Strip.
In a surprising announcement on his Truth Social platform, U.S. President Donald Trump claimed that Russia and Ukraine have agreed to begin ceasefire negotiations following direct conversations with their respective leaders. Trump added that the terms of the talks would be determined bilaterally between the two nations.
Technical Outlook: Resistance Caps Gold’s Upside
From a technical standpoint, gold continues to face resistance near the $3,250–$3,255 range — a level aligned with the 200-period Simple Moving Average (SMA) on the 4-hour chart. The inability to break above this resistance, coupled with bearish momentum indicators, suggests a downside bias in the short term.
If gold breaks below the $3,200 support level, a further decline toward the $3,178–$3,177 zone is likely. A decisive move beneath this threshold could pave the way for a retreat toward the April 10 low near $3,120, with additional support around $3,100 and potentially as low as $3,060.
Conversely, a sustained move above the $3,252 mark would indicate a potential bullish reversal, opening the door for further gains toward the $3,274–$3,275 region and the psychologically significant $3,300 level. Clearing this barrier would likely shift near-term sentiment in favor of the bulls.
Market Outlook
With no major U.S. economic data scheduled for release on Tuesday, investors will closely monitor upcoming speeches by Federal Open Market Committee (FOMC) members for further policy clues. Meanwhile, ongoing trade and geopolitical developments are expected to steer broader market sentiment and influence short-term price movements in the gold market.
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