Gold (XAU/USD) attracts some follow-through selling for the second straight day and dives to over a one-week low, around the $4,858 area, heading into the European session on Tuesday. The commodity, however, bounces back above the $4,900 mark as traders opt to await more cues about the US Federal Reserve’s (Fed) rate-cut path before placing fresh directional bets.
Hence, the focus will remain glued to the release of the FOMC Minutes on Wednesday. Moreover, the US Personal Consumption Expenditure (PCE) Price Index, due on Friday, will play a key role in influencing the near-term US Dollar (USD) price dynamics. This, in turn, would provide a fresh impetus to the non-yielding Gold during the latter part of the week. In the meantime, the USD is seen struggling to lure buyers amid dovish Fed expectations.
In fact, traders priced in higher odds that the US central bank will lower borrowing costs in June and cut interest rates more than two times this year. This, in turn, fails to assist the USD in attracting any meaningful buyers and should continue to act as a tailwind for the Gold. Apart from this, nervousness ahead of the second round of US-Iran nuclear talks, aimed at de-escalating tensions, could offer some support to the safe-haven previous metal.
However, the prevailing risk-on environment – as depicted by a generally positive tone around the equity markets – might continue to undermine demand for the Gold price. Traders now look to the release of the Empire State Manufacturing Index, which, along with Fed speak, could drive the commodity. Nevertheless, the mixed fundamental backdrop warrants some caution before placing directional bets around the XAU/USD pair.
XAU/USD 1-hour chart
Gold bears now await break below the daily low before placing fresh bets
The overnight failure to build on the momentum beyond the downward sloping 100-hour Simple Moving Average (SMA) and the subsequent fall favor bearish traders. The Moving Average Convergence Divergence (MACD) line stays below its Signal line and under the zero mark, while the negative histogram narrows, hinting at fading downside momentum. The Relative Strength Index stands at 40.75 (neutral-to-bearish), ticking up from prior readings and signaling early stabilization.
Below the falling average, sellers retain the initiative and risk skews to the downside. A decisive close back above the 100-SMA would be needed to shift tone, as a sustained MACD turn higher and an RSI move through 50 could open a recovery phase. Until those signals materialize, rebounds would face pressure, and the broader setup would continue to favor tests of lower levels.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
