Gold fell for a second straight day on Tuesday. It dropped to a one-week low near $4,858, then moved back toward $4,900 in early European trading. Traders are waiting for clearer signals on when the US Federal Reserve will start cutting rates.
The main focus is on the FOMC Minutes due Wednesday and the US Personal Consumption Expenditure (PCE) Price Index due Friday. These reports could shift demand for the US dollar and, as a result, move gold prices.
Fed Expectations And Dollar Impact
Markets are now pricing in a higher chance of a rate cut in June, and more than two cuts this year. The US dollar held onto overnight gains, which reduced demand for gold. However, the dollar also struggled to attract fresh buying.
A risk-on mood in equities has also lowered demand for safe-haven assets like gold. Traders are watching the Empire State Manufacturing Index, more comments from Fed officials, and updates on a second round of US-Iran nuclear talks.
From a technical view, gold failed to push higher above the downward-sloping 100-hour Simple Moving Average. The MACD is still below its Signal line and below zero, while the RSI is at 40.75. A close above the 100-SMA, an RSI move above 50, and a stronger MACD would support a recovery.
With gold looking weak, the near-term setup calls for caution on bullish trades. The loss of momentum suggests sellers are in control for now, which supports short-term bearish strategies. Watch for rallies back toward the 100-hour moving average as possible chances to look for bearish entries.
Inflation Data And Options Positioning
Attention now shifts to the upcoming PCE data. Gold was highly sensitive to inflation reports throughout 2025. For example, when Core PCE last year repeatedly came in below expectations, it strengthened the case for a dovish Fed shift and pushed gold to new highs. A similar soft reading this week could quickly flip sentiment, weaken the US dollar, and lift gold.
Markets now imply a high probability of a June rate cut, which is more aggressive than the Fed’s messaging late last year. This gap may appeal to traders who think the Fed will eventually follow the market. Buying medium-term call options can be a sensible way to position for a larger rally later this year while limiting near-term downside.
That said, the risk-on tone in equity markets—supported by strong inflows since the start of the year—remains a headwind. It may cap upside in gold in the near term. If you expect this to continue, selling out-of-the-money call options or using bear call spreads could work if gold stays range-bound or drifts lower.
Geopolitics also matter. Tension in 2025 helped put a floor under gold prices. If US-Iran talks break down, a sudden flight to safety could catch bearish traders off guard. Keeping a core long position through futures or long-dated options can help hedge against this type of surprise.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
