The price of gold (XAU/USD) has faced challenges in maintaining its modest gains on Monday, retreating towards the lower end of the intraday range during the first half of the European session. Initial optimism surrounding the market’s response to Iran’s attack on Israel over the weekend has waned swiftly, particularly evidenced by a generally positive sentiment in equity markets. This, coupled with expectations of a delay in interest rate cuts by the Federal Reserve (Fed), has posed significant headwinds for the safe-haven precious metal.
Market sentiment has shifted as participants now anticipate the Fed to postpone its first interest rate cut to September from the previously projected June, driven by persistently high inflation levels. Consequently, this has bolstered US Treasury bond yields, deterring traders from initiating fresh bullish positions on gold, given its non-yielding nature. Despite this, Iran’s attack on Israel has elevated concerns of a broader conflict in the Middle East, potentially lending some support to the commodity, albeit subdued demand for the US Dollar (USD).
While the geopolitical tensions have contributed to a modest uptick in the safe-haven appeal of gold, Israeli officials’ inclination towards retaliatory measures has been tempered by the US stance, which clarifies its non-participation in offensive actions against Iran. This stance has limited immediate market reactions and curtailed further upward momentum for XAU/USD.
Technical analysis indicates that for gold bulls to regain control, the price must surpass the $2,372-$2,373 region, confronting resistance near the $2,400 mark thereafter. Conversely, a breach of the $2,334-$2,332 support zone could lead to a corrective decline towards the $2,300 level. A sustained downturn would suggest a near-term peak for gold, potentially paving the way for a deeper retracement towards the $2,220 zone, with intermediate support at $2,250.
In summary, gold prices face a confluence of factors, including hawkish Fed expectations, geopolitical tensions, and technical considerations, which collectively shape its near-term trajectory amidst a volatile market landscape.
