Gold price seems vulnerable above $3,200 amid possible Russia-Ukraine ceasefire

Gold price drifts lower as trade optimism continues to undermine safe-haven demand.
The XAU/USD pair struggles to lure buyers despite Fed rate cut bets and a softer USD.
Even geopolitical risks do little to lend any support to the safe-haven precious metal.

Gold price meets with a fresh supply during the Asian session on Tuesday and reverses the previous day's move higher on the back of the upbeat market mood. Despite a surprise downgrade of the US government's credit rating on Friday, investors continue to cheer the latest optimism over the US-China trade truce for 90 days. This is evident from a generally positive tone around the equity markets, which, in turn, is seen undermining demand for traditional safe-haven assets and exerting pressure on the bullion.

Meanwhile, expectations that the Federal Reserve (Fed) will lower borrowing costs further amid signs of easing inflation and a sluggish economic outlook fail to assist the US Dollar (USD) to attract any meaningful buyers. This, however, does little to lend any support to the non-yielding Gold price. Even persistent geopolitical risks fail to inspire bulls, suggesting that the path of least resistance for the XAU/USD is to the downside. However, the range-bound price action witnessed over the past week or so warrants caution.

Daily Digest Market Movers: Gold price bulls remain on the sidelines amid fading safe-haven demand

Moody's downgraded America's top sovereign credit rating by one notch, to "Aa1" on Friday, citing concerns about the nation's growing debt pile. This, however, had a modest impact on the global risk sentiment amid rising trade optimism, which, in turn, failed to assist the safe-haven Gold price to capitalize on the previous day's modest gains.
Traders increased their bets on further interest rate cuts by the Federal Reserve in 2025 following the release of weak US inflation figures and Retail Sales data last week. In fact, the current market pricing indicates higher odds of at least two Fed reductions in 2025. This keeps the US Dollar depressed near a one-week low touched on Monday.
On a more hawkish note, Atlanta Fed President Raphael Bostic said that inflation is not moving to target as fast as anticipated, and inflation expectations are moving in a troubling way. Bostic added that the number of rate cuts this year depends on how things turn out, and details of the tariffs will matter. Bostic leans toward only one rate cut this year.
New York Fed President John Williams said that the recent economic data has been very good and that the labor market is pretty much in balance. Williams, however, warned that some forward-looking indicators are signaling concern. The key word for the economy is uncertainty, and the monetary policy is in a good place, Williams added further.
Fed Vice Chairman Philip Jefferson noted that the US could face a one-time increase in the price level from tariffs, but needs to be sure that it does not become a sustained increase in inflation. It is too early to tell how the labor market will be affected by trade policies, and the Fed will keep policy in place to be sure that inflation expectations remain anchored.
Minneapolis Fed President Neel Kashkari said that the ongoing uncertainty at the hands of the Trump administration's trade policies has put a significant dent in investor sentiment. Kashkari added that there will be lots of jobs in the future of the US economy and backed the Fed's wait-and-see approach until the tariff landscape settles out.
On the geopolitical front, the Israeli military issued evacuation orders to people in Khan Yunis – the southern city of Gaza – as it launched a new operation to increase pressure on Hamas to accept a temporary ceasefire. Adding to this, Israel's Prime Minister Benjamin Netanyahu claimed that the defence forces will take control of all of the Gaza Strip.
Meanwhile, US President Donald Trump announced on his Truth Social platform that Russia and Ukraine have agreed to start negotiations towards a ceasefire immediately after separate phone conversations with the leaders of both countries. Trump further said that the conditions of the bilateral talks will be negotiated between the two parties directly.
There isn't any relevant market-moving economic data due for release from the US on Tuesday, leaving the USD at the mercy of speeches by influential FOMC members. Apart from this, trade-related developments will play a key role in driving the broader risk sentiment and producing short-term trading opportunities around the XAU/USD pair.

Gold price could accelerate the downfall once the $3,200 pivotal support is broken decisively

From a technical perspective, the overnight failure near the 200-period Simple Moving Average (SMA) support-turned-resistance on the 4-hour chart and the subsequent slide favors the XAU/USD bears. Moreover, negative oscillators on hourly/daily charts suggest that the path of least resistance for the Gold price is to the downside.

Some follow-through selling below the $3,200 mark and the $3,178-3,177 support zone will reaffirm the outlook, which should pave the way for a slide towards last week's swing low, around the $3,120 area, or the lower level since April 10. This is closely followed by the $3,100 mark, which, if broken decisively, might expose the next relevant support near the $3,060 region.

On the flip side, the $3,250-3,252 area might continue to act as an immediate strong hurdle. A sustained strength beyond the said barrier could suggest that the Gold price has bottomed out and pave the way for additional gains beyond the $3,274-3,275 intermediate resistance, towards the $3,300 round figure. The latter should act as a pivotal point, which, if cleared, would shift the near-term bias in favor of bullish traders.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.