Gold rebounds before US-Ukrainian talks

Gold prices rose in the European market on Monday to hold above a two-week low recorded earlier in Asian trading, with buying activity emerging from low levels ahead of talks between the United States and Ukraine to end the war ongoing in Eastern Europe for more than three years.

The recovery of the precious metal "gold" is being capped by the rise of the US dollar in the foreign exchange market, as markets await further evidence on whether the Federal Reserve will cut interest rates in September.

Price Overview

• Gold prices today: Gold rose by about 0.7% to $3,358.46, from the opening level of $3,336.08, and recorded a low at $3,323.64, the lowest since August 1.

• At Friday’s settlement, gold prices posted a rise of less than 0.1%, their third gain in the last four days, supported by the decline in the US dollar.

• Gold lost 1.8% last week, marking the first weekly loss in three weeks, after the release of strong US producer price and retail sales data.

US-Ukraine Talks

The main event for investors on Monday is a meeting between Trump and Zelensky, joined by some European leaders, as Washington presses Ukraine to accept a quick peace deal to end the deadliest war in Europe in 80 years.

Trump is relying on Zelensky to reach an agreement following his meeting with Russian President Vladimir Putin in Alaska, where he appeared more aligned with Moscow in seeking a peace deal rather than a ceasefire first.

Sources familiar with Moscow’s thinking said Russia would give up small pockets of occupied Ukrainian territory, while Kyiv would abandon large swathes of its eastern lands that Moscow has failed to control, under peace proposals discussed by Putin and Trump during their Alaska summit.

US Dollar

The US dollar index rose by more than 0.2% on Monday, beginning to recover from a two-week low, reflecting a rebound in the US currency against a basket of major and minor peers.

US Interest Rates

• Following strong US producer price and retail sales data, and according to CME’s FedWatch tool: the probability of a 25-basis-point rate cut at the September meeting fell from 99% to 85%, while the probability of no change rose from 1% to 15%.

• The probability of a 25-basis-point rate cut in October fell from 99% to 93%, while the probability of no change rose from 1% to 7%.

• Expectations of a 50-basis-point rate cut in either the September or October meetings have completely disappeared.

• Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said a half-point rate cut in September is unjustified, a day after Treasury Secretary Scott Bessent suggested it was possible.

• To reprice these probabilities, investors are closely watching US economic data and comments from Federal Reserve officials.

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said: Gold was in a defensive position at the start of the day but managed to reverse course as buyers emerged around $3,330 as an investment option. US Treasury yields gave up part of Friday’s gains, which also helped ease the pressure on gold prices.

Waterer added: We are currently seeing limited moves in both directions ahead of what could be crucial White House meetings this week with Zelensky returning to Washington.

SPDR Fund

Gold holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, rose by about 4.01 metric tons on Friday, bringing the total to 965.37 metric tons, the highest since September 9, 2022.