Gold prices (XAU/USD) continued their upward trend for a third consecutive day on Monday, reaching a one-week high around the $2,439-$2,440 mark during early European trading. The ongoing geopolitical instability in the Middle East remains a primary driver of demand for the safe-haven asset. Additionally, growing speculation of more significant interest rate cuts by the Federal Reserve (Fed) is providing further support for the non-yielding precious metal.
However, a generally positive risk sentiment in the market might limit aggressive bullish moves on gold. Investors appear cautious, awaiting key U.S. inflation data—specifically the Producer Price Index (PPI) and Consumer Price Index (CPI)—due to be released on Tuesday and Wednesday. These figures are expected to influence the Fed’s future monetary policy, making it prudent for traders to await further buying momentum before positioning for continued gains from the recent rebound off the 50-day Simple Moving Average (SMA) support.
Market Movers: Rising Middle East Tensions Boost Safe-Haven Appeal of Gold
Recent geopolitical developments, including increased conflict between Israel and Lebanon, along with heightened military alertness in Israel and Western Iran, have amplified concerns of a broader regional conflict. This tension has bolstered gold prices amid dovish expectations for future Fed policy. Market participants are anticipating a 25-basis point rate cut in the Fed’s September meeting, with some even speculating on a more substantial 50-basis point reduction.
Despite these expectations, Fed Governor Michelle Bowman indicated that the central bank might not be ready to cut rates in September due to persistent inflationary pressures and a robust labor market. This uncertainty has failed to provide significant support for the U.S. Dollar or to give a clear directional push to gold at the start of the trading week. As a result, many bullish traders are adopting a wait-and-see approach ahead of the upcoming U.S. inflation data and retail sales figures later this week, which are likely to play a crucial role in shaping the Fed’s policy trajectory.
Technical Outlook: Gold Faces Key Resistance Levels as Bulls Eye Further Gains
Technically, gold’s recent bounce from the 50-day SMA support indicates a favorable outlook for bullish traders, with daily chart oscillators maintaining a positive stance. However, the lack of strong follow-through buying suggests caution. The next key resistance level is expected around $2,448-$2,450. A sustained move above this hurdle could pave the way for a challenge of the all-time high near $2,483-$2,484, with a potential psychological target of $2,500. Conversely, immediate downside support is seen at the $2,412-$2,410 range, followed by the $2,400 mark. Any significant decline might attract buyers near the 50-day SMA, currently around $2,373-$2,372, with a break below this level potentially shifting the near-term bias towards bearish territory.
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