By Daniela Sabin Hathorn, senior market analyst at Capital.com

Gold (XAU/USD) is attempting to regain bullish momentum at the start of the week, though upside progress remains capped by key technical resistance. The precious metal found support near the 50-day simple moving average (SMA) at $3,168 last week, triggering a modest rebound as short-term sellers opted to lock in profits following recent weakness. Attention now turns to $3,250, a level that has capped advances in the past four sessions.

Gold (XAU/USD) daily chart

Technical Landscape

Despite Monday's modest gains, gold continues to struggle with upward follow-through. The daily chart suggests price action is caught between technical support and resistance zones, limiting the potential for a breakout unless broader market catalysts emerge.

Macro Backdrop: Mixed Signals

While the long-term outlook for gold remains constructive—bolstered by expectations of continued central bank buying and a softer interest rate environment—the short-term narrative has shifted. Easing geopolitical tensions, particularly between China and the U.S., have reduced demand for traditional safe-haven assets. Unless these tensions re-emerge or President Trump rekindles confrontation with trading partners, gold may remain on the back foot in the near term.

However, the recent downgrade of the U.S. credit rating by Moody's has reintroduced concerns about American fiscal stability. Although this downgrade was largely anticipated—it aligns with earlier actions by S&P and Fitch—it has renewed market attention on the sustainability of U.S. debt. For many investors, it served as a wake-up call that the U.S. is walking a fiscal tightrope, with risks compounded if Trump continues to pursue expansive spending policies.

Market Reactions: Cautious Optimism for Gold

In response, a mild 'sell America' trade has emerged, contributing to a tentative bid in gold as investors hedge against deteriorating U.S. fiscal dynamics. Nonetheless, the downgrade also triggered a sell-off in U.S. Treasury bonds, pushing yields higher. Rising yields typically dampen the appeal of non-yielding assets like gold, and this has curbed the metal's bullish momentum.

Outlook

In sum, while structural support for gold persists, the current environment remains mixed. The metal is caught between long-term bullish fundamentals and short-term headwinds. To build a more sustained rally, gold will need a decisive break above $3,250 alongside either a renewed deterioration in risk sentiment or clearer signals of central bank easing.