Gold prices traded in a tight range on Monday as investors weighed China’s economic outlook and geopolitical tensions in the Middle East.
By 3:35 pm AEDT (4:35 am GMT) the precious metal traded flat $2,656.3.
The U.S. dollar gained strength, driven by a souring risk sentiment amid light trading conditions. Investors turned cautious following China’s fiscal stimulus announcements over the weekend, which failed to provide the clarity markets had anticipated.
China's Finance Minister, Lan Foan, reiterated the government's broad plans to revive the economy but offered no specific details on the size or timing of new measures.
This left investors unimpressed, especially after previous reports suggested that China might issue special sovereign bonds worth approximately CNY 2 trillion.
Adding to the pessimism, China’s latest inflation data, released on Sunday, showed continued disinflationary pressures in consumer and factory-gate prices, undermining confidence in the world’s largest commodities market.
Geopolitical tensions have further contributed to gold's decline. A recent drone attack in northern Israel killed four Israeli soldiers and injured over 60 people, while China conducted military drills near Taiwan, drawing condemnation from both Taipei and the United States.
China’s military claimed the exercises were a warning against Taiwan’s independence efforts. Taiwan’s Defence Ministry responded by stating it would not escalate the conflict.
Despite the downturn in gold prices, support remains from heightened expectations that the US Federal Reserve will cut interest rates by 25 basis points at its upcoming policy meeting in early November.
The CME Group’s FedWatch Tool indicates an 86.8% chance of a rate cut, following dovish comments from Fed officials and a continued slowdown in U.S. inflation.