The potential downside for gold may be limited, as the Federal Reserve implemented its third rate cut of the year last week and signaled further cuts in 2026. Lower interest rates could reduce the opportunity cost of holding non-yielding gold, thereby supporting the precious metal. However, optimism over Ukraine peace negotiations could dampen safe-haven demand, limiting upside room for gold prices. Holdings in SPDR Gold Trust, the world's largest gold ETF, declined by 1.43 tons from the previous day to 1,051.69 tons, reflecting some institutions' defensive positioning ahead of data releases. Analysts noted that the U.S. dollar and Treasury yields will dominate gold's short-term trend. If Treasury yields rebound or the dollar strengthens, pressure may build on gold prices. Conversely, weaker economic data—especially signs of labor market slowdown—could reinforce expectations of Fed rate cuts, weaken the dollar, and support gold. Michael Wan, Financial Group analyst at Mitsubishi UFJ, pointed out that if November's nonfarm payrolls miss expectations and the unemployment rate rises this week, it could accelerate dollar selling and intensify two-way volatility in interest rate and FX markets. On the geopolitical front, the Russia-Ukraine talks made progress. Reports suggest that the U.S. proposed a security guarantee plan at Berlin talks conditioned on Ukraine conceding the Donbas region, while Trump stated that a "peace agreement" is now closer. Nevertheless, significant disagreements remain on territorial issues, Ukraine faces continued military pressure, and the likelihood of an immediate comprehensive ceasefire remains low. Geopolitical uncertainty may still provide underlying support for gold.

According to the CME Group's FedWatch Tool, the probability implied by federal funds futures markets for the Fed to hold rates steady at the January meeting is 75.6%, unchanged from the previous day. The U.S. government shutdown has delayed the release of several economic data points, which will be published later on Tuesday. Among them, the U.S. nonfarm payrolls report will be the focal point, potentially offering more clues about the direction of U.S. interest rates. If the data shows a slowing U.S. labor market, it would strengthen expectations of Fed rate cuts and boost gold prices. In addition, U.S. retail sales data and PMI figures will be released simultaneously. 

Fundamental data showed that the New York State December manufacturing index unexpectedly plunged to –3.9, significantly below the market forecast of 10 and the previous reading of 18.7, re-entering contraction territory and reflecting weakening momentum in regional economic activity.

Regarding monetary policy expectations, Fed officials expressed divergent views: New York Fed President Williams noted that slowing employment and reduced inflation risks supported December's rate cut decision but remained cautious on the future policy path; Boston Fed President Collins also voiced support for recent rate cuts; Fed Governor Miran suggested that underlying inflation is near target, implying current policy may be too tight and favoring further easing. Despite differing opinions among officials, the market remains indifferent, indicating the shift of focus to broader macro data guidance.

Regarding the 4-hour chart, Bollinger Bands are opening downward, with price oscillating along EMA12 and the Bollinger Lower Band in a downtrend. Besides, the short-term trend remains in a falling channel. After MACD formed a death cross, the signal and MACD lines moved below the zero axis, and bearish momentum has not weakened, suggesting the correction is ongoing. RSI is at 37, showing strong bearish sentiment, while support levels are at 4,248 and 4,200. Regarding the daily chart, gold rose strongly along the Bollinger Upper Band, but yesterday's high was rejected at the Upper Band, and today's adjustment broke below 4,300. If the price stays below 4,300, it is likely to adjust toward EMA12 and the Bollinger Middle Band, around 4,240 and 4,173. The MACD bullish histogram is weakened, but no death cross appears, suggesting a correction in the near term. Meanwhile, RSI is at 66, still in bullish territory. Therefore, it is better to sell now and then buy.     

Trading direction: Sell

Entry price: 4305

Target price: 4100

Stop loss: 4400

Support: 4200/4100/3800

Resistance: 4200/4100/3800