Spot gold recently approached the key psychological level of 4,350 USD, supported by market expectations for Federal Reserve rate cuts and moves in the U.S. Dollar. Yet as risk-off sentiment quickly cooled, gold gave back part of its earlier gains.

The main driver of this shift came from progress made in high-level talks between U.S. officials and Ukrainian President Zelensky on ending the war, which significantly reduced safe-haven demand in the market. At the same time, global traders are now focused on the upcoming set of key U.S. employment data, which will further clarify the Federal Reserve’s future policy path.

On Sunday, Ukrainian President Zelensky held an intensive five-hour meeting in Berlin, with the participation of U.S. envoys. In this meeting, the Ukrainian side proactively floated the proposal of giving up NATO membership, which has been viewed as a major concession signal.

The positive signs on Russia-Ukraine peace talks appear to have dampened safe-haven demand for gold, putting pressure on prices. The gold market is also facing profit-taking and ongoing selling pressure that has lasted for a week, as some earlier buyers are choosing to lock in gains.

Investors are now closely watching the U.S. nonfarm payrolls report and retail sales data due on Tuesday. These releases will provide further clues on the Fed’s policy path.

From policymakers’ perspective, regardless of how the data come out, they are likely to assess them more cautiously than usual. The key task for markets is to use this data to clarify the true trend of the U.S. labor market and avoid being misled by short-term noise.

This report will also have a major impact on expectations for Fed rate cuts next year. At present, markets are pricing in two additional rate cuts by September next year, while the Federal Reserve itself only projects one cut.

Market Commentary:

On the 4-hour chart, gold is consolidating at elevated levels, with the MACD lines and histogram converging near the zero line. If the data come in strong, the U.S. Dollar could gain further support, putting additional pressure on gold; conversely, if the data disappoint, it may reignite rate-cut expectations and fuel a rebound in gold prices. Investors need to closely track the interaction between geopolitical developments and economic data to better capture market opportunities.