On Tuesday, gold sales do not weaken for the third consecutive day, as signs of easing trade tensions between the U.S. and China—the two largest economies in the world—continue to undermine demand for traditional safe assets.
However, expectations of a possible further reduction in interest rates by the U.S. Federal Reserve continue to exert pressure on the dollar, keeping it at low levels and contributing to a moderate increase in gold, which recently reached more than two-week lows.
According to CME Group's FedWatch tool, market participants are fully prepared for the upcoming two-day meeting on Wednesday, where the Fed is expected to lower rates by 25 basis points, and are pricing in the possibility of another cut in December.
These expectations were supported by fresh U.S. inflation data released on Friday. Both the overall and core consumer price indices (excluding food and energy) rose by 3% year-on-year in September, bolstering hopes of further monetary tightening.
Relations between the U.S. and Russia have intensified following President Putin's announcement of successful tests of a new nuclear-powered cruise missile. In response, President Trump reminded that an American nuclear submarine is stationed off the coast of Russia, maintaining the risk of further escalation and geopolitical instability. This factor continues to support gold as a safe-haven asset. However, optimism regarding U.S.-China trade may suppress further growth.
On Sunday, American and Chinese representatives reached an agreement on preliminary frameworks for a potential trade agreement, which will be discussed at the upcoming meeting between Trump and Chairman Xi Jinping, scheduled for this week. This alleviated fears of a large-scale trade war and generally reinforced positive sentiment in the stock markets. At the same time, investors may refrain from making new long-term purchases in the XAU/USD pair ahead of key risks related to central bank events this week.
From a technical perspective, the price acceptance below the psychological level of $4,000, along with negative momentum building in the Relative Strength Index (RSI) on the daily chart, confirms the likelihood of further declines in the price of the precious metal.
On the other hand, a breakout above the high of the Asian session, around $4,019–4,020, can be viewed as an opportunity for sales, which would be constrained in the $4,050–4,055 zone. A rise beyond this zone would trigger short position covering rallies toward the area of $4,109–4,110.
