Gold declines as trading volumes remain subdued due to holidays in China

• Gold trades nearly 0.7% lower as trading volumes stayed thin due to market holidays in China and other parts of Asia.

• Gold losses may be limited as softer US CPI boosts expectations of two Fed rate cuts this year.

• Safe-haven demand for yellow metal may rise after Iran drills in the Strait of Hormuz amid renewed US tensions.

Gold price (XAU/USD) extends its losses for the second successive session, trading around $4,930 per troy ounce during the Asian hours on Tuesday. Gold price is trading nearly 0.7% lower at the time of writing as trading volumes stayed thin due to market holidays across China, Hong Kong, and other parts of Asia.

However, losses in the non-yielding metal may be limited after as softer United States (US) Consumer Price Index (CPI) data for January strengthened expectations that the Federal Reserve (Fed) could implement two 25-basis-point rate cuts later this year.

According to the CME Group’s FedWatch tool, markets now price in roughly a 52% probability of a 25-basis-point rate reduction in June and 44% in July. Traders now turn to the Fed Meeting Minutes, Q4 GDP data, and the Fed’s preferred core PCE price index later this week for clearer guidance on the monetary policy outlook.

January’s US Nonfarm Payrolls (NFP) posted the strongest growth in more than a year, and the Unemployment Rate unexpectedly edged lower, signaling a stabilizing labor market. Still, caution prevails as the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, continues to run closer to 3% than its 2% objective, with disinflation progress uneven since mid-2025.

Safe-haven demand for Gold may strengthen amid rising tensions between the United States and Iran ahead of a second round of talks. Tehran on Monday conducted maritime drills in the Strait of Hormuz after Washington deployed a second aircraft carrier to the region, as both sides prepare to resume nuclear negotiations on Tuesday.

Meanwhile, US-led discussions between Russia and Ukraine are also scheduled to start Tuesday, though markets remain doubtful about any meaningful diplomatic breakthrough in the near term.