In early Asian trading on Tuesday, spot gold was fluctuating narrowly and currently trading around $2,310.15 an ounce. Gold prices rebounded on Monday after experiencing the biggest single-day decline in three and a half years in the previous trading day, closing at around $2,310.71 an ounce. Investors are waiting for US inflation data and the Fed's interest rate decision later this week.

In addition, attention needs to be paid to the resistance position near $2,314.64, which has supported the gold price many times before the decline last Friday and has now turned into a strong resistance. Before breaking through this position, there is still a further downside risk for the gold price.

Phillip Streible, chief market strategist at Blue Line Futures, said Friday's sell-off seemed a bit overdone, "buyers are entering the market at this lower price level."

Last Friday, the price of gold fell by about $83 per ounce, a 3.5% drop, the biggest single-day drop since November 2020. The better-than-expected US employment report prior to this weakened the hope of a rate cut in September FEDWATCH, and reports that the Chinese central bank suspended gold purchases also deterred investors betting on Chinese demand.

"The People's Bank of China (PBOC) has never been a continuous buyer of gold. It has appeared in obvious stages of buying gold, followed by months of suspension. But as long as the PBOC does not resume buying, the gold price may consolidate as the topic of China's gold buying is the focus of the market," said Carsten Menke, an analyst at Julius Baer.

Despite rising US dollar and treasury yields, gold is still temporarily rebounding, and the market focus has shifted to the US consumer price index report due to be released on Wednesday, when the Fed will announce its policy decision. Signs of slowing inflation may change market expectations for the Fed's rate path.

"Investors are really anxious about the Fed meeting in an environment where they really don't know which way it's going," said Jim Barnes, director of fixed income at Bryn Mawr Trust.

"Everyone seems to be eager to cut interest rates, but there is currently no reason to do so. So they are focusing on Wednesday morning's CPI data, hoping it will provide us with more direction, and paying attention to more comments from the Fed later that afternoon, trying to get more information."

The yield on 10-year US Treasuries rose 4.3 basis points to 4.471% on Monday. The 30-year Treasury bond yield rose 4.9 basis points to 4.597% on Monday.

The US employment report last Friday showed greater-than-expected job gains in May and higher-than-expected wage increases, which also boosted the dollar and caused traders to reduce their bets on the Fed cutting rates as soon as September.

"The market is obviously caught off guard," said Paula Comings, director of foreign exchange sales at U.S. Bank in New York.

Comings said that if inflation softens, "the market would feel some relief, and I think the dollar might weaken, but it might not break away from its recent range."

"However, if the data shows high inflation, the euro / dollar will continue to fall towards the lower end of the range," which will have "disproportionate effects on (emerging market) currencies," said Comings.

Fed officials have said they want to see inflation fall back toward their 2% target for a few months before cutting rates.

Economists surveyed expect total consumer price inflation to fall from the previous month's 0.3% to 0.1%, while core price inflation is expected to remain at 0.3%.

A report released Monday by the Federal Reserve Bank of New York showed a mixed sentiment among the American public about the future inflation path. The public's one-year inflation expectation stood at 3.2% in May, down from 3.3% in April.

Federal Reserve policymakers will release their latest economic and interest rate forecasts when they end their two-day meeting on Wednesday. The median forecast in the last forecast released in March was for three rate cuts of 25 basis points each this year, and investors expect the new forecast to reduce the number of rate cuts.

The US dollar index rose 0.19% to 105.12 on Monday, hitting a high of 105.39, the highest since May 14, earlier.

The market generally expects the Federal Reserve to keep interest rates unchanged at this week's meeting, with the probability of a rate cut of at least 25 basis points in September at around 50%, according to CME's FedWatch tool, which is lower than nearly 60% a week ago. The strong employment report has made the timing of rate cuts uncertain.

The focus is on the Federal Reserve's latest economic forecast and the news conference to be held by Fed Chairman Powell after the two-day meeting. It is expected that the Fed will not make any changes to its policy rate this week.

It is worth noting that the United Nations Security Council passed a resolution in support of the ceasefire plan between Israel and Hamas, which may further suppress the demand for gold as a safe haven.

New York Fed Survey: Public's one-year inflation expectations fell in May, while five-year inflation expectations rose.

A report released by the Federal Reserve Bank of New York on Monday showed that the public in May had mixed feelings about the future path of inflation in the United States.

The regional Fed's monthly Consumer Expectations Survey found that the public's one-year inflation expectation was 3.2%, down from 3.3% in April, and that the three-year inflation expectation remained steady at 2.8%. Respondents' five-year inflation expectations were 3%, up from 2.8% in April.

The survey also found that the one-year housing price increase expectation among the public remained steady at 3.3% in May, while the gasoline price increase expectation remained unchanged at 4.8%. Expectations for food price increases were 5.3%, while expectations for rent increases were 9.1%, both flat with April. Expectations for medical care cost increases were higher than in April.

The report also showed that the public's assessment of its current financial situation improved in May, but their perception of credit availability remained unchanged. The report also showed that the average probability of a rise in stock prices one year later among the public increased to the highest level since May 2021.

The survey also found that the likelihood of a rise in the unemployment rate one year later had also increased among the public.

The United Nations Security Council has passed a resolution supporting the ceasefire plan between Israel and Hamas.

The UN Security Council on Monday supported US President Biden's proposal for a ceasefire between Israel and Hamas in the Gaza Strip, urging Palestinian militants to accept it and end the eight-month war.

Hamas welcomed the US-drafted resolution’s passage, saying in a statement that it was willing to work with mediators to implement a plan that “meets the demands of our people and resistance.”

Russia abstained from the UN vote, while the other 14 members of the Security Council voted in favor of Biden's three-stage peace proposal, which he said was initiated by Israel.

The resolution welcomes the new ceasefire proposal, noting that Israel has accepted it and urging Hamas to do the same, and “calls on both sides to implement its terms without delay and in good faith and urges further negotiations to sustain the ceasefire beyond the initial phase.”

Algeria, the only Arab member of the Security Council, supported the resolution because “we believe it represents a step towards an immediate and durable ceasefire,” said Algeria's ambassador to the United Nations Amar Bendjama.

The resolution also provides details of the proposal, specifically stating that “if negotiations in the first phase exceed six weeks, the ceasefire term will be extended as long as negotiations continue.”

But Moscow believes the details of the resolution are insufficient. Russian Ambassador to the United Nations Vassily Nebenzia asked what Israel specifically agreed to and said the Security Council should not sign “ambiguous” agreements.

Israeli Ambassador to the United Nations Gilad Erdan attended the vote but did not speak. Reut Shapir Ben Naftaly, Israel's senior diplomat to the United Nations, said in the Security Council, “The targets of our operations in Gaza have always been clear: to rescue all the hostages, to destroy Hamas' military and governing capabilities, and to ensure that Gaza no longer poses a threat to Israel. Hamas has prevented an end to this war. Hamas and only Hamas.”

"Israel is committed to achieving these goals - rescuing all hostages, destroying Hamas' military and governing capabilities, and ensuring that Gaza no longer poses a threat to Israel," she said. "It is Hamas that has prevented the end of this war. Hamas, only Hamas."

(Spot gold daily chart, source: E-Hui Tong)

At 07:42 Beijing time, spot gold was trading at $2,309.92 per ounce.