Gold Slips Below $3,210 as Risk Appetite Grows on Trade Truce and Ceasefire Hopes

Gold prices extended their decline in early European trading on Tuesday, with XAU/USD hovering just above the $3,200 level as market appetite for risk continues to weigh on demand for safe-haven assets. Optimism surrounding the recent U.S.-China trade truce, alongside fresh hopes for a Russia-Ukraine ceasefire, have underpinned a broadly positive risk tone across financial markets. This shift in sentiment has kept investors on the sidelines with respect to gold, traditionally viewed as a hedge during times of geopolitical or economic uncertainty.

Despite the weakening bias in gold, the decline comes amid lackluster demand for the U.S. dollar, which typically provides support to the non-yielding metal. Expectations that the Federal Reserve could cut interest rates further in 2025 remain intact, especially after a string of disappointing U.S. macroeconomic data last week, including softer inflation readings and weaker retail sales. Markets are currently pricing in at least two rate cuts by the Fed next year, a development that has pushed the dollar to a one-week low as of Monday.

Gold’s inability to rally under these dollar-depressing conditions signals persistent selling pressure and hesitation among buyers. Last week’s downgrade of the U.S. sovereign credit rating by Moody’s, from Aaa to Aa1, citing the growing national debt burden, had limited impact on global risk sentiment and failed to deliver lasting support to gold. Instead, traders remain focused on trade and geopolitical developments, which appear to be fueling a shift away from traditional safe-haven assets.

Comments from several Federal Reserve officials added nuance to the rate outlook, contributing to market uncertainty. Atlanta Fed President Raphael Bostic signaled caution, noting that inflation was not easing as quickly as hoped and warning of troubling trends in inflation expectations. He indicated that only one rate cut may be appropriate this year, depending on how economic conditions evolve and how tariffs affect inflation. New York Fed President John Williams echoed a more balanced view, describing recent economic data as strong but acknowledging uncertainty ahead. He maintained that monetary policy is currently well-positioned.

Vice Chair Philip Jefferson highlighted concerns about a one-time price surge due to tariffs, emphasizing the importance of anchoring inflation expectations. Minneapolis Fed President Neel Kashkari pointed to investor caution in response to the Trump administration’s ongoing tariff policies and supported a wait-and-see approach from the Fed until more clarity emerges.

Geopolitical tensions also remained in focus. The Israeli military intensified operations in southern Gaza, issuing evacuation orders for the city of Khan Yunis, while Prime Minister Benjamin Netanyahu reaffirmed the country’s commitment to taking full control of the Gaza Strip. At the same time, U.S. President Donald Trump announced that both Russia and Ukraine had agreed to begin ceasefire negotiations following his separate discussions with their leaders. While details remain scarce, the announcement injected further optimism into global markets and pressured gold prices further.

With no major U.S. economic data releases scheduled for Tuesday, attention turns to further remarks from Federal Reserve officials for short-term direction. Trade-related news will also play a critical role in shaping broader market sentiment. As the geopolitical landscape continues to evolve, gold’s near-term trajectory may remain capped unless risk appetite diminishes or new catalysts emerge to revive safe-haven demand.