- Gold prices are expected to rise on Monday as geopolitical tensions reignite demand for safe havens.
- The USD has dipped below recent highs, which further benefits precious metals.
- Market attention is now turning to the upcoming two-day FOMC policy meeting starting Tuesday.
Currently, the price of Gold (XAU/USD) is showing some positive movement as the European trading session approaches. However, there isn’t a strong follow-through since traders seem to be holding back, likely looking for more insight into the Federal Reserve’s interest rate trajectory before taking significant positions. The upcoming outcomes from this FOMC meeting, which concludes on Wednesday, are particularly important for influencing short-term USD dynamics and could have a notable impact on gold prices.
In the meantime, US President Donald Trump’s erratic trade policies are adding a layer of uncertainty for investors. Additionally, the ongoing tensions from the Russian-Ukraine conflict and issues in the Middle East keep geopolitical risks in play, benefiting gold. Moreover, the recent decline in the USD, which has slipped from a few week-highs amid economic concerns and Fed rate cut expectations, seems to provide extra support for the XAU/USD pairing.
Daily Digest Market Mover: Gold Prices bolstered by new geopolitical concerns and a weakened US dollar
- Russian President Vladimir Putin stated in a Sunday interview that Russia is fully equipped to bring the ongoing conflict with Ukraine to a conclusion. This comes ahead of a three-day ceasefire, which Putin has declared unilaterally from May 8th to 10th, although Russia has rejected proposals for an unconditional ceasefire from Ukraine and the US.
- Israeli Prime Minister Benjamin Netanyahu has vowed to retaliate against Houthi rebel missile strikes that targeted Ben Gurion International Airport on Sunday. He indicated that Iran would also face repercussions for these attacks. Iran’s defense minister, Aziz Nasirzadeh, warned that a response would follow any strikes from the US or Israel.
- On Sunday, President Trump announced 100% tariffs on all foreign-produced films. His unpredictable stance on trade is causing uneasiness among investors, leading to an influx of safe-haven buying that may help gold recover from last week’s lows near the $3,200 mark.
- Following a more favorable release of US employment figures on Friday, traders are betting that the Federal Reserve will likely cut interest rates in June. The unemployment rate remains steady at 4.2%, highlighting a still robust labor market in the US.
- Nevertheless, the USD is struggling to attract significant buyers and has fallen below the highs reached last Thursday as economic uncertainties grow due to Trump’s tariffs. This situation offers additional support for the XAU/USD pair as we approach the two-day FOMC meeting on Tuesday.
- Additionally, insights from influential Fed officials during their speeches later this week will be closely monitored for indications about future monetary policy. Meanwhile, on Monday, the US ISM Services PMI will also be released.
Gold prices have dipped below the support level of $3,260-3,265 and now face resistance
From a technical perspective, precious metals displayed some resilience last week but have dipped below the 50% Fibonacci retracement level, which peaked around $2,900. Any bounces from the $3,200 level should be approached with caution before deciding on further positioning, particularly following the recent drop from the $3,500 level, the highest point in April. However, if the price increases further, it might encounter strong resistance near the $3,260-3,265 support level. Persisting above this threshold could allow gold prices to climb toward the $3,367-3,368 ranges and also test the $3,400 mark, in addition to supply zones around $3,348-$3,350.
Conversely, if prices dip below the $3,225 level (the 50% Fibonacci level), there may be some support before reaching the nearby $3,200 mark. A solid break below this level could lead to a decline to the $3,170-3,165 area, which includes the 61.8% Fibonacci level and the 200-period simple moving average. A continuation of sales in this scenario could trigger further bearish moves, paving the way for an extension of the downturn.
