Gold prices have declined to approximately $3,025 in early Asian trading on Monday. This drop follows a record high last Thursday, influenced by hopes for a peace deal in Ukraine, which reduces the demand for safe-haven assets like gold.
Discussions took place over the weekend between Ukrainian and US officials in Riyadh, with a focus on ending the ongoing conflict. The Ukrainian Defense Minister described the talks as productive, addressing key points such as the protection of energy facilities.
Impact Of Federal Reserve Policies
While optimism for a ceasefire may lower gold demand, expectations of future interest rate cuts by the Federal Reserve could limit any further losses for the precious metal. The Fed has maintained steady interest rates recently and anticipates two cuts in 2025 amidst economic uncertainties.
In addition, central banks remain the largest holders of gold, having added 1,136 tonnes worth about $70 billion in 2022, marking the highest annual purchase on record. Emerging economies like China, India, and Turkey are significantly increasing their gold reserves.
Gold’s price is also affected by various factors, including geopolitical events and fluctuations in the US dollar. Typically, a weaker dollar corresponds with higher gold prices, while a stronger dollar tends to suppress them.
Gold has dropped to around $3,025 at the beginning of Asian trading this Monday, marking a clear retreat from its record peak last Thursday. The market appears to be adjusting in response to renewed optimism about peace efforts in Ukraine, which has lessened the appeal of safe-haven assets. A series of weekend discussions in Riyadh involving Ukrainian and American officials contributed to this shift in sentiment. Defence Minister Umerov’s description of these talks as “productive” suggests that the focus on shielding infrastructure, particularly energy facilities, might eventually lead to broader diplomatic advances.
That said, traders watching interest rate expectations should not overlook the influence that the US Federal Reserve continues to have. The central bank’s message has been relatively consistent—rates remain stable for now, but officials still project multiple reductions in 2025 due to economic uncertainty. If those expectations hold, gold might find some support here. Lower rates tend to weaken the dollar, making commodities like gold more attractive for investors globally. Given that markets continuously reprice such projections based on economic data, attention should remain on upcoming employment and inflation figures in the US.
Global Central Bank Influence
Central banks collectively maintain a firm grip on the gold market. With the highest annual purchases recorded in 2022—totalling 1,136 tonnes worth approximately $70 billion—official institutions have boosted their reserves considerably. It’s particularly evident in economies such as China, India, and Turkey, where authorities have aggressively expanded their holdings. This trend indicates another strong source of demand outside of traditional investor activity, reinforcing gold’s broader appeal in portfolios that seek long-term value preservation.
Price behaviour in gold also remains closely tied to movements in the US dollar. The relationship between the two is well established; any weakening in the US currency generally provides upward pressure on gold, while periods of dollar strength tend to weigh on its value. This ongoing dynamic remains critical for assessing future price action. For traders navigating derivatives markets, volatility linked to such correlations should be taken into account, particularly as macroeconomic events continue to shape expectations.
