- Investors reacted little to US President Joe Biden's decision to end his re-election campaign on Sunday amid expectations that the US equity market would benefit from Trump's proposed policies.
- Adding to this, the People's Bank of China (PBoC) surprised markets by cutting key short and long-term rates and provided an additional boost to the global risk sentiment.
- China's central bank lowered the one-year loan prime rate (LPR), the five-year LPR and the seven-day reverse repo rate by 10 basis points (bps) to 3.35%, 3.85% and 1.7%, respectively.
- The move comes in the wake of a disappointment from the lack of short-term stimulus to support the real economy from the Third Plenum meeting Chinese officials held last week.
- Nevertheless, the combination of factors triggered a fresh wave of the risk-on trade and turned out to be a key factor that led to the overnight downfall in the safe-haven Gold price.
- Moreover, a second Trump presidency is expected to be more inflationary, pushing the US Treasury bond yields higher and contributing to driving flows away from the XAU/USD.
- Meanwhile, money markets have fully priced in a rate cut by the Federal Reserve in September, which keeps the US Dollar bulls on the defensive and lends support to the yellow metal.
- Traders now look to Tuesday's US economic docket, featuring Existing Home Sales and the Richmond Manufacturing Index, for short-term opportunities later during the North American session
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