Risk-On Causes Gold to Tumble, Can the Fed Save It?
Gold prices (XAU/USD) weakened again in the Asian session on Tuesday, falling to a nearly three-week low, after briefly attempting to rise above the psychological $4,000 per ounce level. This marked the third consecutive day of gold's decline. The main cause: renewed global market confidence. Optimism that US-China trade relations will thaw has made investors more comfortable taking risks in assets like stocks and cyclical commodities, rather than seeking refuge in safe-haven assets like gold.
In addition to sentiment factors, gold's decline was also driven by technical selling. After failing to hold above $4,000, further selling emerged from short-term traders. However, the downward pressure did not completely spiral out of control. There was a limiting factor: expectations that the Fed would become increasingly dovish this year.
The market now believes the US central bank (the Fed) will cut interest rates two more times before the end of the year. Expectations of these cuts caused the US dollar to weaken for two consecutive days, and a weaker dollar usually helps gold prices because gold is priced in dollars. So, even though gold is under pressure from risk-on sentiment, there's still support from the monetary side.
Furthermore, global geopolitical risks—particularly the ongoing Russia-Ukraine war—are keeping some investors reluctant to fully exit gold. Therefore, many market participants are choosing not to take aggressive positions before the outcome of the two-day Federal Reserve (FOMC) meeting, which begins Tuesday. The bottom line: gold is again under pressure from trade-friendly sentiment, but the "gold as a hedge" story isn't over yet. (Asd)
Source: Newsmaker.id
