**XAU/USD Tumbles to Near $3,950 on Fed’s Hawkish Comments, Trade Optimism**
Gold price (XAU/USD) slumped to near $3,965 during the early Asian session on Monday. The precious metal extended its decline as a constructive US-China trade outcome boosted global risk appetite.
Traders are now awaiting the release of the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for October, scheduled for later on Monday. This key economic indicator could provide important insights into the US economic outlook and influence market sentiment.
Last week, US President Donald Trump and Chinese President Xi Jinping agreed to avoid escalation in their ongoing trade war. As part of the deal, Trump decided to lower tariffs from 57% to 47% in exchange for China suspending export controls on rare earth elements and increasing purchases of American soybeans.
These positive developments surrounding the US-China trade deal may reduce the demand for safe-haven assets like gold, putting further pressure on the gold price.
Additionally, hawkish remarks from Federal Reserve (Fed) officials contributed to the yellow metal’s downside movement. At its October meeting last week, the US central bank lowered its benchmark overnight borrowing rate to a range of 3.75%-4.0%.
Fed Chair Jerome Powell stated during the press conference that a further reduction in the policy rate at the December meeting is not a foregone conclusion. Currently, the markets are pricing in a 63% probability that the Fed will cut the federal funds target range by 25 basis points (bps) in December.
Overall, market expectations point to an 82 bps rate reduction by the end of 2026, bringing the federal funds rate down to approximately 3.06% from the current effective rate of 3.88%.
The upcoming US ISM October Manufacturing PMI data could influence this outlook. Should the report reveal weaker-than-expected results, it may weaken the US Dollar (USD) and provide some near-term support to USD-denominated commodities such as gold.
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