Gold prices (XAU/USD) experienced a modest decline from their near-record high of around $2,589-$2,590, ending lower for the first time in four days on Tuesday. This retreat was primarily driven by profit-taking, though trading activity remained subdued as market participants awaited key central bank meetings later this week before making new bets. The Federal Reserve is set to announce its decision at the conclusion of its two-day meeting on Wednesday, followed by the Bank of England’s (BoE) meeting on Thursday and the Bank of Japan’s (BoJ) policy update on Friday.
Despite the extensive speculation about a substantial interest rate cut by the Fed, the US Dollar (USD) has struggled to capitalize on its recent rebound from its lowest level since July 2023. This has led to renewed interest in gold, a non-yielding asset. However, a potential 25 basis points (bps) rate cut could support the USD and put downward pressure on gold prices.
Additionally, the risk of further escalation in the Middle East and political uncertainty in the US ahead of the November presidential election may provide ongoing support for the precious metal, potentially limiting any further declines. This environment suggests that any short-term pullback in gold prices may present a buying opportunity.
