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Gold prices returned to the 4,000 USD per troy ounce mark on Tuesday, partially recovering from the previous day's 3.2% decline. The initial sell-off was triggered by encouraging developments in US-China trade negotiations.

According to officials, the two sides reached a framework agreement on tariffs and several key issues during talks in Malaysia. This paves the way for a final approval by the US and Chinese leaders at their upcoming meeting in South Korea later this week.

The metal found renewed support as investor attention shifted to the impending US Federal Reserve meeting. Markets are now pricing in a 25 basis point rate cut following the release of softer-than-anticipated inflation data, making this one of the most significant events in a week packed with risk.
 

Technical Analysis: XAU/USD

H4 Chart:
 

(Click on image to enlarge)

On the H4 chart, XAU/USD formed a consolidation range around 4,085 USD before breaking decisively to the downside. The market appears to be developing the second leg of this downward wave, with a subsequent target projected at 3,785 USD. This bearish near-term outlook is supported by the MACD indicator. Its signal line is pointing downward, and the histogram has moved into negative territory, suggesting the corrective phase is not yet complete.

H1 Chart:
 

(Click on image to enlarge)

On the H1 chart, the pair is developing a downward structure toward 3,785 USD. A consolidation range has formed around 3,971 USD; a break below this level would signal a continuation of the decline toward the stated target. The Stochastic oscillator confirms this momentum, with its signal line positioned below 50 and trending downward toward 20, reflecting strengthening selling pressure.
 

Conclusion

While gold has rebounded on shifting expectations for Fed policy, the technical structure points to further potential downside. The primary focus for traders will be the Fed's decision, which will determine whether this current correction extends toward 3,785 USD or if the longer-term bullish trend can reassert itself.

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