HG MARKETS:

Gold (XAU/USD) has remained under pressure on Monday morning, although it has managed to recover slightly from the day’s lows and is currently hovering around the psychologically important $5,000 level. Despite this rebound, traders are advised to exercise caution before taking aggressive bearish positions, as several factors could support the precious metal and limit further declines.

The US Dollar (USD) has shown a modest uptick, which has weighed on the safe-haven bullion, alongside a generally positive risk sentiment in global markets. However, geopolitical tensions continue to loom ahead of the second round of US-Iran nuclear talks scheduled for this week. The US has deployed a second aircraft carrier to the region and has signaled preparedness for a potential prolonged military campaign if negotiations fail. In response, Iran’s Revolutionary Guards have warned of retaliatory action against any US military targets, a development that could provide a boost to Gold prices.

From a fundamental perspective, any meaningful appreciation in the USD appears limited, supported by dovish expectations for the Federal Reserve (Fed). Softer US inflation data, following last week’s strong Nonfarm Payrolls (NFP) report, has increased market speculation that the Fed may reduce borrowing costs in June. The headline US Consumer Price Index (CPI) rose 0.2%, while the core measure increased 0.3%, reinforcing expectations of a more accommodative monetary policy and providing support to the non-yielding yellow metal.

Trading activity has also been relatively subdued due to the US Presidents Day holiday, resulting in thinner market volumes. This environment tends to discourage aggressive directional bets on the XAU/USD pair, limiting volatility despite the mix of supportive and bearish factors. Nevertheless, any statements from Fed officials could prompt short-term moves in both the USD and Gold as traders respond to policy signals.

Looking ahead, market participants will focus on the Federal Open Market Committee (FOMC) meeting minutes on Wednesday, which are expected to provide further clarity on the Fed’s rate-cut trajectory. Additionally, global flash Purchasing Managers’ Index (PMI) data due on Friday will likely offer new opportunities for traders to gauge risk sentiment and refine their Gold positions heading into the end of the week.