Gold prices continue to trend lower at the start of the new trading week, extending their retreat to around $3,025 in Monday’s early Asian session. The recent downturn comes as optimism surrounding a potential peace agreement between Ukraine and Russia dampens demand for traditional safe-haven assets like Gold (XAU/USD).
The yellow metal, which surged to record highs last week, is now under pressure as geopolitical tensions ease slightly. Over the weekend, Ukrainian and US officials met in Riyadh, Saudi Arabia, to resume diplomatic efforts aimed at ending the ongoing war.
Ukrainian Defense Minister Rustem Umerov described the discussions as “productive and focused,” with key proposals centered on protecting energy infrastructure and critical facilities. Separate meetings between US and Russian delegates are expected to take place on Monday, adding to hopes for a breakthrough.
These developments have taken some of the shine off Gold, which often attracts buyers during periods of global uncertainty. As optimism for a ceasefire grows, investors appear to be rotating out of safe-haven positions, leading to a cooling in Gold demand.
However, the downside for Gold may remain limited due to expectations surrounding US monetary policy. Despite leaving interest rates unchanged during its meetings in January and March, the Federal Reserve has signaled a dovish outlook, projecting two potential rate cuts in 2025. This expectation of lower borrowing costs may help cushion Gold’s decline, as lower interest rates tend to support non-yielding assets like Gold.
Fed Chair Jerome Powell recently emphasized the ongoing uncertainty in the economic outlook, noting that factors such as former President Donald Trump’s proposed tariffs could dampen economic growth and contribute to inflationary pressures. This macroeconomic backdrop could ultimately revive safe-haven interest in Gold if the economic environment deteriorates further.
Alex Ebkarian, Chief Operating Officer at Allegiance Gold, commented, “Gold hasn’t yet acted as a strong safe-haven asset for retail investors because we’re not officially in a recession. However, economic slowdown is evident, and further uncertainty could reignite interest in Gold as a defensive asset.”
Gold Investment Insights: Key FAQs
Why is Gold a popular investment?
Gold has historically been valued as both a store of wealth and a safe-haven asset during times of economic and geopolitical turmoil. It also serves as a hedge against inflation and currency depreciation, making it an attractive investment in volatile markets.
Who are the biggest Gold buyers?
Central banks are the largest Gold holders, often increasing their reserves to support currency stability and economic strength. In 2022, central banks added a record 1,136 tonnes of Gold—worth approximately $70 billion—to their reserves, with countries like China, India, and Turkey leading the purchases.
How is Gold correlated with other assets?
Gold tends to move inversely with the US Dollar and US Treasury yields. When the Dollar weakens or stock markets decline, Gold typically benefits as investors seek safety and portfolio diversification.
What drives Gold prices?
Gold prices are influenced by geopolitical tensions, interest rate expectations, inflation concerns, and overall economic sentiment. Since Gold is priced in US Dollars (XAU/USD), fluctuations in the Dollar significantly impact its value.
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