- Gold prices face challenges in reaching peaks not seen in two months during Asian trading sessions.
- Positive market sentiment alongside slight USD gains is a hurdle for the XAU/USD pair.
- Uncertainties in trade and geopolitical issues are likely to cap losses for precious metals ahead of the upcoming FOMC meeting.
Gold Price (XAU/USD) has pulled back slightly from its highest point since April 22, which was reached during an Asian trading session on Monday. Yet, it seems that significant corrections are hard to come by. The ongoing trade uncertainties and rising geopolitical tensions in the Middle East are proving beneficial for safe-haven assets. Meanwhile, there’s a growing sentiment that the Federal Reserve might lower borrowing costs, further supporting gold’s appeal.
Despite this, traders appear hesitant to make bold moves and seem to prefer waiting for the outcomes of the two-day FOMC policy meeting scheduled for Wednesday. At the same time, the US Dollar is somewhat of a headwind for gold prices, rebounding from a three-year low recorded on Friday. Additionally, the overall upbeat mood in the equity market tends to diminish the allure of precious metals. Nevertheless, the broader context seems to lean towards a bullish scenario for XAU/USD.
Daily Digest Market Movers: Cautious bulls await essential Fed policy decisions this Wednesday
- On Sunday evening, Iran launched a new series of missiles and drones toward Israel, which has retaliated by striking Iranian military positions. The conflict continues into Monday, with Israel promising to intensify its operations against Iran.
- This conflict is likely to push safe-haven gold prices to almost a two-month high during Monday’s Asian session, alongside the sustained uncertainty regarding President Trump’s trade policies. However, various factors are keeping further gains in check.
- So far, the market’s reaction to the escalating military tensions between Israel and Iran has been muted. This is particularly clear in the positive sentiment surrounding Asian stocks. Coupled with the modest rise of the US dollar, this has helped curb demand for precious metals.
- Yet, meaningful advantages for the USD appear elusive as traders might hold back until they receive more information about potential Federal Reserve rate cuts before making any significant moves. Hence, the focus remains on the crucial FOMC policy outcomes expected to be announced on Wednesday.
- The US Central Bank is generally anticipated to maintain the current interest rates. However, traders are beginning to adjust their expectations, considering that rates may not change anytime soon due to signs of inflation and a cooling economy in the US.
- This outlook significantly influences the price dynamics of the short-term US dollar, providing some momentum for the XAU/USD. Meanwhile, the risk of further geopolitical escalations in the Middle East may continue to support the yellow metal.
Gold price shows constructive technical setup inviting dip buyers; $3,400 is crucial for bulls
From a technical perspective, supporting the $3,400 mark as of Friday, the formation of upward channels on short-term charts and positive oscillators on daily charts favors bulls in the XAU/USD market. Thus, any further declines are viewed as potential buying opportunities, although sales below $3,400 could lead to deeper losses around the $3,360 region, marking the lower boundary of the upward channel. A decisive break below this point would negate positive prospects and shift the short-term bias toward bearish traders.
On the other hand, breaking through the recent peak from the Asian session could challenge the all-time high, reaching from approximately $3,452-$3,453 to the psychological $3,500 mark experienced in April. Surpassing this level could serve as a new trigger for bullish traders, paving the way for an extension of the recently established upward trend.
