Gold (XAU/USD) edged lower on Monday, trading around $4,153 after briefly surpassing the $4,200 level during the Asian session, as a firmer US Dollar and mild profit-taking limited further gains following last week's rebound from a more than seven-month low of $3,941 [1]. The US Dollar Index (DXY) rose 0.20% on the day to 101.07, making gold more expensive for holders of other currencies and diminishing the appeal of the non-yielding asset amid expectations of continued restrictive monetary policy [1].
The recent weaker-than-expected US Nonfarm Payrolls (NFP) data released on Thursday reduced market expectations for an immediate Federal Reserve (Fed) interest rate hike, providing some support for gold prices [1]. Additionally, oil-driven inflation risks are easing as shipping through the Strait of Hormuz improves following last month's 60-day Memorandum of Understanding (MoU) between the United States and Iran, suggesting the Fed may not need to tighten policy as aggressively as previously anticipated [1]. However, traders are still pricing in a 56% probability of a rate increase at the September Fed meeting, according to the CME FedWatch Tool [1].
Geopolitical risks remain, with the future management of the Strait of Hormuz still unresolved. Tehran considers the waterway within its sovereignty and seeks to impose transit tolls, with the next round of US-Iran talks expected later this week after the funeral of Iran's Supreme Leader [1]. These ongoing risks, combined with expectations for elevated US borrowing costs, continue to support the US Dollar [1].
Looking ahead, the US economic calendar is relatively quiet, but upcoming data releases—including the ISM Services PMI, ADP Employment Change, FOMC meeting minutes, and weekly Initial Jobless Claims—could provide further clues about the Fed's next policy moves and influence both the US Dollar and gold prices [1]. Technical analysis shows XAU/USD holding just above the 20-day Bollinger SMA at $4,147, with the RSI at 46 indicating subdued directional conviction and the MACD in positive territory, suggesting upside attempts remain possible but not yet decisive [1].
CONCLUSION
Gold prices are currently constrained by a stronger US Dollar and profit-taking, despite support from softer US economic data and easing inflation risks. Market participants remain focused on upcoming US economic releases and ongoing geopolitical developments, which could influence the Fed's policy outlook and the direction of gold in the near term.