Where to go after the big dump in gold prices? Fed policy expectations and geopolitical factors are key variables, and encryption investors need to closely monitor the fluctuation of safe-haven assets.

Gold ( XAU/USD ) has struggled to rebound after a big dump at the beginning of the week, as easing geopolitical tensions have weakened its safe-haven appeal. Mixed U.S. inflation and retail data have cast doubt on the Fed's rate cut path, with fluctuations in U.S. Treasury yields dominating short-term gold price direction. This week focuses on the Fed meeting minutes, PMI data, and Powell's speech at Jackson Hole, with policy divergences exacerbating market uncertainty. Technically, gold prices are trapped in a neutral zone, with $3,355-$3,360 being a key pivot. Crypto market investors need to follow the potential correlation between gold as a traditional safe-haven asset and crypto assets (especially Bitcoin), managing their positions ahead of macro risk events.

Hedge demand fades, gold prices plummet at the beginning of the week

Gold ( XAU/USD ) failed to achieve a meaningful rebound from the bearish start at the beginning of the week, as the market reacted to the easing of geopolitical tensions and mixed macroeconomic data from the United States. Economic activity data from the US and comments from Fed ( officials may drive gold prices in the short term.

Gold price sharply declined after testing $3400 On Monday, gold faced heavy selling pressure, dropping more than 1.5% in a single day, as easing geopolitical tensions weakened its demand as a safe haven. Market optimism about a possible resolution to the Russia-Ukraine conflict increased—following the announcement of an upcoming meeting between U.S. President Trump and Russian President Putin—leading to a positive sentiment as the market opened for the week. Later on Monday, President Trump announced that tariffs on Chinese imports would be delayed for 90 days. In response, China's Ministry of Commerce stated on Tuesday morning that it would suspend the inclusion of certain U.S. companies on the "unreliable entity list" for the next 90 days and also suspend the additional tariffs on U.S. goods for 90 days.

Inflation data provides a breather, gold prices temporarily find support After a big dump on Monday, gold found support around $3,350 on Tuesday, as the US inflation data for July strengthened market expectations that the Fed would cut rates three times for the remainder of the year, leading to a decline in US Treasury yields. According to data released by the Bureau of Labor Statistics (BLS), the annual inflation rate, measured by changes in the Consumer Price Index (CPI), remained steady at 2.7% in July. Month-on-month, the CPI and core CPI rose by 0.2% and 0.3%, respectively, in line with analysts' estimates. Year-on-year, the core CPI increased by 3.1%, faster than the 2.9% rise recorded in June. According to the CME FedWatch tool, the probability of the Fed cutting rates by a total of 75 basis points this year climbed from about 40% before the inflation report to over 55%.

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(Economic Calendar | Source: FXStreet)

PPI data is hot, gold prices continue to fall In the absence of high-impact data releases, gold fluctuated within a narrow range on Wednesday, closing essentially flat. On Thursday, the monthly data released by the BLS showed that the Producer Price Index for July )PPI( rose 3.3% year-on-year, significantly up from the 2.4% increase in June. On a monthly basis, both PPI and core PPI rose by 0.9%. The hot PPI inflation data prompted the market to reassess the Fed's policy outlook, opening the door for a rebound in U.S. Treasury yields, and leading gold to continue its weekly decline. The mixed economic data released in the U.S. failed to trigger a significant market reaction, with gold remaining in the lower half of its weekly range. U.S. retail sales increased by 0.5% month-on-month in July, while industrial production contracted by 0.1%. Finally, the preliminary consumer sentiment index from the University of Michigan fell from 61.7 in July to 58.6 in August.

This Week's Focus: PMI Data and Powell's Speech at Jackson Hole Geopolitical factors may drive gold valuations early this week. If there are no signs of de-escalation in the Russia-Ukraine conflict following the Trump-Putin meeting, gold may benefit from safe-haven inflows.

Fed Meeting Minutes Outlook (Limited Impact) On Wednesday, the Fed will release the minutes from its July policy meeting. Since this meeting was held before the latest employment and inflation data was released, the content of this document may be outdated and less likely to provide new clues for the policy outlook.

PMI data may trigger USD fluctuations On Thursday, S&P Global will release the preliminary values of the August Manufacturing and Services Purchasing Managers' Index (PMI). If the Services PMI, which reached 55.7 in July, shows a significant decline, it could immediately harm the USD. On the other hand, if the Manufacturing PMI rises above 50 and the Services PMI is close to the July level, the USD may remain resilient against other currencies, making it difficult for gold XAU/USD to gain upward momentum.

Powell's speech may trigger market fluctuations On Friday, Fed Chairman Jerome Powell will speak at the Jackson Hole symposium. Powell's remarks could trigger a sharp reaction in U.S. Treasury yields and intensify the fluctuation of gold ahead of the weekend.

Significant Internal Policy Divergence at the Fed Recent comments from Fed officials highlight the divergence of opinions on the policy outlook. Some policymakers advocate for multiple rate cuts this year, while others believe that the uncertainty surrounding the inflation outlook necessitates a more cautious easing stance. Fed Governor Michelle Bowman recently stated that the latest weak labor market data underscores her concerns about the fragility of the labor market and bolsters her confidence in the prediction that three rate cuts may be needed this year. On the other hand, Kansas City Fed President Jeffrey Schmid believes that the impact of tariffs on inflation is limited and is a reason to maintain the current policy rather than cut rates.

Potential Impact of Powell's Speech If Powell downplays the disappointing employment data and suggests that they need time to assess the inflation dynamics after the first rate cut this year, investors may reduce their bets on three rate cuts this year. This scenario would help to push up U.S. Treasury yields and drag down gold prices. Conversely, if Powell expresses growing concerns about the deteriorating labor market conditions, investors may continue to hold out hope for a 75 basis point rate cut in 2025.

Gold Technical Analysis: Neutral Zone Awaiting Breakthrough

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(Gold Price Analysis | Source: TradingView) The recent technical outlook for gold shows a neutral stance. The relative strength index )RSI( is moving sideways around 50 on the daily chart, while gold prices fluctuate near the 20-day and 50-day simple moving averages )SMA(. The $3,355-$3,360 area (20-day MA, 50-day MA) seems to have formed a pivot point. If gold fails to recover this level, technical sellers may remain interested. In this case, the $3,305-$3,285 area (100-day MA, 23.6% Fibonacci retracement of the uptrend from January to June) may become the next support area, followed by $3,200 (static level, round number). If gold stabilizes above $3,355-$3,360 and converts this area into support, the next resistance level may be at $3,400 (static level, round number), followed by $3,430 (static level).

Conclusion: The gold trend this week will depend on geopolitical developments, the resilience of U.S. economic data, and the Fed's interest rate cut expectations. The divergence among Fed officials and Powell's speech may become the key catalyst to break the current technical deadlock. Crypto market investors need to be vigilant about the sharp fluctuations of traditional safe-haven asset gold, which, as a tool for hedging against fiat currency inflation, may exhibit complex interactions with crypto assets like Bitcoin when market risk aversion rises. It is recommended to closely follow the movements of U.S. Treasury yields and the strength of the dollar index to grasp potential market turning points and timing for crypto asset allocation.