Gold prices (XAU/USD) extended their decline to around $3,025 during the early Asian session on Monday, following a record high reached last Thursday. The precious metal edged lower as optimism surrounding a potential Ukraine peace deal dampened demand for gold, traditionally viewed as a safe-haven asset. Meanwhile, expectations of further rate cuts from the Federal Reserve (Fed) and ongoing economic uncertainties may limit the downside for gold.
On Sunday, Ukrainian and US officials resumed peace talks in Riyadh, Saudi Arabia, aiming to end three years of war. President Donald Trump has pushed for a ceasefire, with Ukrainian Defense Minister Rustem Umerov describing the discussions as “productive and focused.” The talks centered on proposals to protect energy facilities and critical infrastructure. US and Russian delegates are expected to meet separately on Monday to continue the negotiations.
The optimistic developments regarding a potential ceasefire between Russia and Ukraine have diminished the safe-haven appeal of gold, which typically benefits from geopolitical uncertainty. However, the prospect of further rate cuts from the Fed may help limit gold’s losses.
The Fed has kept interest rates steady in recent meetings, awaiting more progress on disinflation. Policymakers have projected an average of two rate cuts in 2025, as reflected in recent updates. Despite this, Fed Chair Jerome Powell noted that President Trump’s policies, including import tariffs, could have slowed US economic growth and contributed to inflation.
Alex Ebkarian, chief operating officer at Allegiance Gold, commented that gold is not yet acting as a safe-haven asset for retail investors, as the economy is not officially in a recession. However, the ongoing economic slowdown could create further uncertainty, fueling demand for safe-haven assets like gold.