On Monday (June 2nd) during the Asian trading session, spot gold opened higher and continued to rise, once jumping over $20 to $3316.50/ounce, as Ukraine's weekend attacks on multiple Russian military airfields heightened geopolitical concerns. However, with Russia and Ukraine scheduled to hold peace talks in Istanbul on Monday, the market still exhibits some wait-and-see sentiment. Surveys show that with the release of the US May non-farm payrolls report this week, Wall Street is leaning towards a wait-and-see approach for the future trend, with bullish sentiment slightly prevailing.

Gold prices fell 0.82% last Friday, having dropped to around $3272 during the session and closing near $3290/ounce, as the market digested the latest tariff developments and the dollar saw a slight rebound, while a weaker inflation report kept hopes for a US interest rate cut alive, providing support for gold prices.

A US federal appeals court temporarily reinstated President Trump's most comprehensive tariff policy last Thursday, a day after a US trade court ruled he had overstepped his authority and ordered tariffs to be blocked.

"Gold is currently pulling back from its recent highs, in a consolidation period," said David Meger, director of metals trading at High Ridge Futures. "Gold is under slight pressure, we're seeing a slight reduction in safe-haven demand, but it looks like Trump will really fight back hard, which will ultimately help gold prices."

In terms of data, the US Personal Consumption Expenditures (PCE) price index increased by 2.1% year-on-year in April, with an expected increase of 2.2%. After the report was released, traders continued to bet on the Fed lowering short-term borrowing costs in September.

Interest rate futures show that the probability of a Fed rate cut in September has risen to 87%, after falling to 60% last Wednesday. This trading day will see the release of US May ISM Manufacturing PMI data, which investors need to pay close attention to.

Ukraine Attacks Multiple Russian Military Airfields

According to Ukrainian security service sources, Ukrainian drones attacked multiple Russian military airfields on Sunday (June 1st), including the Belaya military base deep in eastern Siberia. More than 40 aircraft, including A-50, Tu-95, and Tu-22 M3, were damaged in the operation, with losses estimated at approximately $2 billion. The operation was led by Vasyl Malyuk, head of Ukraine's security service. The attack occurred after Ukraine suffered Moscow's longest drone and missile attack and was also the day before ceasefire talks were planned in Istanbul.

On June 1st, Irkutsk Oblast Governor Igor Kobzev stated that the Ukrainian side launched a drone attack on the military base in Sredny town, marking the first drone attack on a military base in the Siberian region. In addition, drone-dropped bombs hit an old building in Novomaltinsk. The exact number of drones is still being counted. Emergency services and law enforcement agencies have rushed to the scene and established an emergency command center.

Kobzev said that a cargo truck used to launch the drones had been found and blocked. He called on local residents to remain calm. No civilians were injured in the attack.

On June 1st local time, the governor of Russia's Murmansk Oblast announced that the region had been attacked by drones. The governor is currently on his way to Olenegorsk, and local air defense systems have been activated to respond to the drone attack.

According to an unnamed US government official, the Trump administration was not notified in advance that Ukraine would launch a large-scale attack on Russia this weekend.

In addition, investors are also paying attention to news related to the Middle East situation.

On June 1st local time, Iranian Air Force Commander Amir Vahedi stated that given the current regional situation, continuous vigilance and rapid response are among the important principles of the Iranian Air Force. Amir also stated that the Iranian Air Force is ready to resolutely defend Iranian airspace at any time and under any circumstances.

Russia-Ukraine Peace Talks Held in Istanbul

According to news released by the Turkish Ministry of Foreign Affairs on June 1st local time, the second round of talks between Ukrainian and Russian delegations is scheduled to be held at 13:00 local time on the 2nd at Çırağan Palace in Istanbul.

On May 30th, Russian presidential press secretary Dmitry Peskov told the media that the Russian delegation would travel to Istanbul and was ready to start the second round of negotiations with Ukraine on June 2nd.

On June 1st local time, Ukrainian President Volodymyr Zelensky stated via social media that on that day he received a comprehensive report on defense, operational, and diplomatic work from the Ukrainian Minister of Defense, Minister of Foreign Affairs, General Staff, intelligence agencies, and security service, and emphasized that Ukraine is doing its utmost to defend national independence and public safety, and has set key tasks for the near future.

Regarding the upcoming meeting in Istanbul on June 2nd, Zelensky clearly put forward three core demands: firstly, a comprehensive and unconditional ceasefire; secondly, promoting the exchange of all prisoners of war between both sides; thirdly, ensuring the safe return of abducted children.

According to Ukrainian documents obtained by Reuters, Ukrainian negotiators will propose a roadmap for achieving a lasting peace solution at the Istanbul peace talks on June 2nd. The proposed roadmap begins with a comprehensive ceasefire of at least 30 days, after which both sides will return all prisoners of war they hold and Ukrainian children brought into Russian-controlled areas, followed by a meeting between Zelensky and Putin.

Under this blueprint, Russia and Ukraine, with the participation of the United States and Europe, will work to develop conditions that both sides can agree upon to completely end the war. The framework conditions for the peace agreement proposed by Ukraine in the document are fundamentally the same as those previously put forward. These include not restricting Ukraine's military strength after a peace agreement is reached, the international community not recognizing Russia's sovereignty over occupied parts of Ukraine, and compensation for Ukraine. The document also points out that the current front line positions will be the starting point for territorial issue negotiations. These conditions differ significantly from the demands publicly put forward by Russia in recent weeks.

On June 1st local time, Russian Foreign Minister Sergey Lavrov held a phone conversation with US Secretary of State Antony Blinken. The two sides discussed the situation related to the Ukrainian crisis. Blinken expressed condolences for the casualties caused by the collapse of railway infrastructure in Russia's Bryansk and Kursk regions. In addition, the two sides also discussed plans for direct Russia-Ukraine negotiations on June 2nd.

The US State Department said that at Russia's request, US Secretary of State Blinken held talks with the Russian Foreign Minister on Sunday, and Blinken reiterated Trump's call for both sides to continue direct dialogue to achieve lasting peace.

On June 1st local time, Hungarian Prime Minister Viktor Orbán revealed previously undisclosed information about his mediation in the Russia-Ukraine conflict in an interview with foreign media. Orbán stated in the interview that during the "peace mission" that began in early July 2024, he visited Ukraine and persuaded President Zelensky that time was not on Ukraine's side, and the later the ceasefire, the greater the losses. However, Zelensky said at the time that time was on Ukraine's side and that Ukraine would ultimately achieve military victory. Subsequently, Russia also expressed its stance that time was on Moscow's side. Therefore, Orbán believes that it will be difficult for Russia and Ukraine to reach an agreement on a ceasefire.

The progress of the Russia-Ukraine peace talks will greatly affect changes in market risk sentiment and changes in gold's safe-haven demand, which investors need to pay close attention to.

Survey Shows: Wall Street Cautious on Gold Price for the Week Ahead

The latest Kitco Gold Weekly Survey shows that after a weak performance last week, industry experts and retail investors have a more balanced view on the gold price outlook, but the bullish side still has a slight edge.

Rich Checkan, President of Asset Strategies International, is bullish: "Gold prices have consolidated around $3,300 and are poised to move... especially if the tariff appeals court ruling maintains the status quo. Coupled with the 'magnificent tax cut bill' passed by the Senate which will increase deficit spending, all of these will lead to monetary expansion and rising prices."

Adam Button, Head of Currency Strategy at Forexlive, believes: "The TACO incident angered Trump, and he is seeking confrontation. Gold is currently driven by the trade war; he will try to rebuild credibility." But he added: "The downside risk is the courts; I think the Supreme Court will eventually veto some tariffs."

Last week, 14 analysts participated in the Kitco survey. Wall Street is more wait-and-see after last week's decline. Six experts (43%) expect gold prices to rise, four (29%) are bearish, and another four (29%) believe it will consolidate. Meanwhile, among 2490 votes in the Kitco online poll, retail bulls maintained a slight advantage with 56%, 24% were bearish, and 20% expected consolidation.

This Week's Focus

Traders this week will shift their focus to employment data, including Tuesday's JOLTS job openings, Wednesday's ADP employment, Thursday's initial jobless claims, and Friday's non-farm payrolls report. The market will also focus on Monday's ISM Manufacturing and Wednesday's ISM Non-Manufacturing indexes, as well as the Bank of Canada's interest rate decision on Wednesday and the European Central Bank's on Thursday.

Adrian Day, President of Adrian Day Asset Management, expects gold prices to continue to fluctuate next week, but any decline will be brief, as there appear to be buyers waiting to buy the dips. He believes that although market focus is on the capricious tariff policy, gold's true drivers existed long before the current administration and the Russia-Ukraine war. "Going back to the fall of 2022, gold had already risen significantly long before Trump entered the White House. Stepping back, I don't think gold's movement is driven by tariffs; that's just a factor superimposed on other events like Gaza, Ukraine, etc."

Day pointed out that the fundamental drivers of gold have not changed: "Central banks facing dollar weaponization hope to diversify their reserves, a trend that predates the Trump era. In 2000, about 75%-80% of non-US central banks' foreign exchange reserves were in USD, and this has continuously declined over the past 25 years—five years ago it was about 65%, a significant drop for slow-moving institutions. These long-term trends have nothing to do with Trump and tariffs." But he emphasized: "Nothing that happens this year will make central banks think 'we don't need gold'."

Looking ahead to the US May employment report, Day believes that the impact of important data has significantly diminished after the Fed paused its monetary policy actions. "If the employment data is so bad that people think the Fed will cut rates earlier, that's very bullish for gold. But small fluctuations are no longer important." He expects gold to continue consolidating in the current environment, and good news might bring a slight downside. "I don't see any factors that would cause gold prices to plummet in the short term."

Kitco senior analyst Jim Wyckoff expects gold prices to potentially decline next week: "Technicals are weakening, and there's a lack of new bullish fundamental news."