Gold (XAU/USD) remains depressed through the early European session on Monday, though it manages to defend the $4,200 mark amid mixed fundamental cues. A generally positive tone around the equity markets undermines demand for traditional safe-haven assets and drags the precious metal away from its highest level since October 20, touched on Monday. However, dovish US Federal Reserve (Fed) expectations act as a tailwind for the non-yielding yellow metal and help limit further losses.

Investors now seem convinced that the US central bank will lower borrowing costs again at its upcoming policy meeting next week. This, in turn, fails to assist the US Dollar (USD) to capitalize on the overnight bounce from a two-week low and continues to offer some support to the Gold price. This, in turn, makes it prudent to wait for strong follow-through selling before placing aggressive bearish bets around the XAU/USD pair as traders now look to this week's US macro data for a fresh impetus.

Daily Digest Market Movers:

Gold bulls remain on the sidelines as fading safe-haven demand offsets Fed rate cut bets.

Asian equity markets begin the day on a positive note after the previous day's selloff, undermining demand for the traditional safe-haven Gold on Tuesday. The commodity, however, reverses an Asian session dip to sub-$4,200 levels amid dovish Federal Reserve expectations and the bearish sentiment surrounding the US Dollar.

Traders ramped up their bets for further policy easing by the US central bank following the recent comments from several Fed officials. Adding to this, the recent tepid US economic data suggests that growth in the world's largest economy is cooling and reaffirms market expectations for another interest rate cut by the Fed in December.

In fact, the Institute for Supply Management (ISM) reported on Monday that its Manufacturing PMI for November fell to 48.2 from 48.7 in the previous month. The reading missed estimates and pointed to a slowdown in the manufacturing sector, which could potentially impact the overall economy and keep the USD bulls on the defensive.

On the geopolitical front, US envoy Steve Witkoff and Russian President Vladimir Putin are expected to hold talks in Moscow on Tuesday to discuss the Trump administration's proposal to end the war in Ukraine. This comes after Ukraine's negotiator Rustem Umerov said that significant progress had been achieved in the latest Florida talks.
However, US Secretary of State Marco Rubio noted that more work remains to be done towards ending the war.

Furthermore, Ukrainian President Volodymyr Zelensky was seeking support from European allies amid fears that the US plan reads like a wishlist for Moscow. This keeps geopolitical risks in play and supports the XAU/USD pair.

Traders now look forward to this week's important US macro releases, including the ADP report on private-sector employment and the US Personal Consumption Expenditure (PCE) Price Index. The crucial data will influence expectations about the Fed's rate-cut path, which, in turn, will drive the USD and provide a fresh impetus to the commodity.

Source: Fxstreet