• Gold drifts lower for the second straight day amid a combination of negative factors.
• The USD preserves the overnight gains and undermines demand for the commodity.
• A positive risk tone also weighs on the XAU/USD pair as trades await FOMC Minutes.

Gold (XAU/USD) rebounds swiftly from the vicinity of mid-$4,800s, or over a one-week trough, and trades above the $4,900 mark during the first half of the European session on Tuesday. The commodity, however, maintains its offered tone for the second straight day as traders opt to await more cues about the US Federal Reserve's (Fed) rate-cut path before placing fresh directional bets.

Hence, the focus will remain glued to the release of the FOMC Minutes on Wednesday. Moreover, the US Personal Consumption Expenditure (PCE) Price Index, due on Friday, will play a key role in influencing the near-term US Dollar (USD) price dynamics. This, in turn, would provide a fresh impetus to the non-yielding Gold during the latter part of the week. In the meantime, the USD is seen struggling to lure buyers amid dovish Fed expectations.

In fact, traders priced in higher odds that the US central bank will lower borrowing costs in June and cut interest rates more than two times this year. This, in turn, fails to assist the USD in attracting any meaningful buyers and should continue to act as a tailwind for the Gold. Apart from this, nervousness ahead of the second round of US-Iran nuclear talks, aimed at de-escalating tensions, could offer some support to the safe-haven previous metal.

However, the prevailing risk-on environment – as depicted by a generally positive tone around the equity markets – might continue to undermine demand for the Gold price. Traders now look to the release of the Empire State Manufacturing Index, which, along with Fed speak, could drive the commodity. Nevertheless, the mixed fundamental backdrop warrants some caution before placing directional bets around the XAU/USD pair.

XAU/USD 1-hour chart

Gold could attract fresh sellers at higher levels amid a bearish technical setup

The overnight failure to build on the momentum beyond the downward sloping 100-hour Simple Moving Average (SMA) and the subsequent fall favor bearish traders. The Moving Average Convergence Divergence (MACD) line stays below its Signal line and under the zero mark, while the negative histogram narrows, hinting at fading downside momentum. The Relative Strength Index stands at 40.75 (neutral-to-bearish), ticking up from prior readings and signaling early stabilization.

Below the falling average, sellers retain the initiative and risk skews to the downside. A decisive close back above the 100-SMA would be needed to shift tone, as a sustained MACD turn higher and an RSI move through 50 could open a recovery phase. Until those signals materialize, rebounds would face pressure, and the broader setup would continue to favor tests of lower levels.

(The technical analysis of this story was written with the help of an AI tool.)