- Gold price bulls seem reluctant amid a modest USD strength and the Fed’s hawkish stance.
- Escalating geopolitical tensions in the Middle East could offer support to the XAU/USD pair.
- Traders now look forward to the release of the global flash PMIs for short-term impetuses.
Gold price (XAU/USD) struggles to capitalize on its modest Asian session uptick and attracts fresh sellers in the vicinity of the $3,400 mark on Monday. The US Dollar (USD) opens with a bullish gap in reaction to the US attack on Iran’s nuclear facilities on Sunday, which, in turn, is seen as a key factor that acts as a headwind for the commodity. Apart from this, the Federal Reserve’s (Fed) hawkish signal last week contributed to driving flows away from the non-yielding yellow metal.
Meanwhile, the risk of a further escalation of geopolitical tensions in the Middle East takes its toll on the global risk sentiment and underpins demand for traditional safe-haven assets. This holds back traders from placing aggressive directional bets and keeps the Gold price confined within a one-week-old range. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of last week’s retracement slide from a nearly two-month high.
Daily Digest Market Movers: Gold price fails to benefit from the global flight to safety
- In a significant escalation in the ongoing war between Iran and Israel, the US launched airstrikes targeting three Iranian nuclear sites in Fordo, Natanz, and Isfahan early Sunday. Iran’s Foreign Minister Abbas Araghchi vowed that Iran would defend itself by all means necessary against not just US military aggression but also the reckless and unlawful actions of the Israeli regime.25-basis-point
- Araghchi called the event outrageous and added that it would have everlasting consequences. Meanwhile, US President Donald Trump warned that any retaliation would be met with greater force and added that there would either be peace or tragedy for Iran. This raises the risk of spillover and a broader conflict in the Middle East, which should underpin the safe-haven Gold price.
- The Federal Reserve projected two rate cuts this year. However, Fed officials forecast only one 25-basis-point rate cut in each of 2026 and 2027 amid worries that the Trump administration’s tariffs could push up consumer prices. This assists the US Dollar in holding steady near last week’s swing high and keeps a lid on a further appreciating move for the non-yielding yellow metal.
- Monday’s release of flash PMIs could provide a fresh insight into the global economic health. This, along with geopolitical developments, will influence the risk sentiment and drive the safe-haven XAU/USD. Apart from this, the USD price dynamics should provide some meaningful impetus and help the commodity to break through a one-week-old trading range.
Gold price could accelerate fall once the ascending channel support is broken
From a technical perspective, the XAU/USD bears await some follow-through selling below the 100-period Simple Moving Average (SMA) and a convincing break below a short-term ascending channel before placing fresh bets. Given that oscillators on the daily chart have been losing positive traction and gaining negative momentum on hourly charts, the Gold price might then accelerate the fall towards the $3,323-3,322 intermediate support before eventually dropping to sub-$3,300 levels.
On the flip side, the $3,400 round figure now seems to have emerged as an immediate strong barrier for the commodity. A sustained move beyond could lift the Gold price to the $3,434-3,435 region en route to the $3,451-3,452 area, or a nearly two-month top touched last Monday. Some follow-through buying would then allow bulls to aim towards challenging the all-time peak, around the $3,500 psychological mark. The latter nears the ascending channel hurdle and could cap the precious metal.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
