XAU/USD: Analysis and Forecast

[Ben Graham]

The precious metal began the new week with a decline. Signs of easing trade tensions between the United States and China have boosted investor appetite for riskier assets, which in turn has undermined demand for gold, traditionally viewed as a safe-haven asset.

On Sunday, senior economic officials from China and the U.S. reached a preliminary understanding on the potential framework of a future trade agreement. The news came ahead of the upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping, scheduled for the end of this week. U.S. Treasury Secretary Scott Bessent stated that talks held on the sidelines of the ASEAN summit in Kuala Lumpur effectively averted the threat of 100% tariffs on Chinese imports that were due to take effect on November 1.

This development calmed financial markets, easing investors' anxiety over a potential escalation of the trade war between the world's two largest economies. As a result, the new week opened with a sharp rise in equity prices, while gold, as a traditional safe-haven asset, has shown some weakness.

At the same time, expectations of interest rate cuts by the U.S. Federal Reserve are becoming increasingly likely, though bullish traders remain cautious. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.3% in September, pushing annual inflation to 3%. Excluding food and energy, the index increased 0.2% month-over-month, while the core annual inflation rate held steady at 3%. These readings came below market expectations, reinforcing speculation that the Fed may soon lower interest rates.

The CME Group's FedWatch Tool is now almost fully pricing in a 25-basis-point rate cut in December, limiting the U.S. dollar's rebound after touching a weekly low last Friday. Against this backdrop, geopolitical tensions — particularly the ongoing Russia–Ukraine conflict — remain a key factor supporting gold.

On Sunday night, Russia launched another large-scale drone attack on Kyiv. Meanwhile, Vladimir Putin announced the successful completion of a recent nuclear cruise missile test, which could further support gold prices.

For now, traders should await the outcome of the Federal Open Market Committee (FOMC) meeting, which will play a key role in shaping short-term U.S. dollar dynamics and determining the next stage of movement in XAU/USD.

From a technical standpoint, mixed oscillators on the daily chart call for caution among bearish traders. If prices fail to hold above the key $4,000 level, it may signal the potential for deeper losses.

On the other hand, if prices recover above the $4,100 mark, gold could regain upward momentum, targeting $4,140, where a short-covering rally may be triggered. A sustained break above this level would likely accelerate bullish momentum, paving the way for a move toward the $4,200 psychological level.

The material has been provided by InstaForex Company - www.instaforex.com