Gold (XAU/USD) has struggled to gain meaningful traction at the start of the new week, remaining just below the $3,000 mark touched on Friday. Despite this, the near-term outlook seems to favor bulls, supported by growing concerns over escalating trade tensions and geopolitical risks, which continue to provide support for the safe-haven yellow metal.
Trade Tensions and US Economic Worries Support Gold
Gold remains well-supported by trade war jitters and ongoing concerns about the US economic slowdown. Traders are increasingly pricing in the possibility that the Federal Reserve will cut interest rates multiple times this year, driven by fears of a tariff-induced economic downturn, softening inflation, and signs of a cooling labor market. This outlook has weighed on the US dollar and continues to benefit gold.
However, a positive risk tone, bolstered by China’s new stimulus measures, has capped gold’s gains ahead of the Federal Open Market Committee (FOMC) decision on Wednesday. Despite this, geopolitical risks, including tensions in the Middle East and further military confrontations, have helped maintain gold’s appeal as a safe-haven asset.
Geopolitical Risks Fuel Gold’s Safe-Haven Demand
In the geopolitical sphere, escalating tensions in the Middle East have contributed to gold’s support. The ongoing conflict in Yemen, with US airstrikes and Houthi threats to target US ships, along with violent clashes in Gaza, have kept market participants on edge, further driving demand for gold as a safe asset.
US Economic Data and Fed Rate Cut Bets
The growing belief that the Federal Reserve will lower interest rates this year has supported gold. Fed funds futures suggest that the central bank could cut rates by 25 basis points in June, July, and October. This expectation was reinforced by weaker-than-expected US inflation data and a significant drop in consumer sentiment, which has placed further pressure on the US dollar.
China’s stimulus efforts to boost domestic consumption and ease housing market policies have also bolstered market confidence, capping gold’s rally for now.
Gold Technical Analysis: Bullish Momentum Continues
From a technical standpoint, gold’s recent breakout through key resistance levels signals that the bullish trend remains intact. The daily Relative Strength Index (RSI) remains close to overbought territory, which may prevent further immediate gains. A period of consolidation or a slight pullback is likely before gold can resume its upward momentum.
Any pullback is expected to find strong support around the $2,928–$2,930 zone, with further potential support at $2,900. If gold falls below $2,928, it could face additional losses, with the next target being around the $2,880 region.
Conclusion
Gold remains supported by geopolitical risks and expectations of Fed rate cuts, which continue to weigh on the US dollar. However, positive risk sentiment from China’s stimulus measures has capped its gains ahead of the upcoming FOMC meeting. The technical outlook suggests that gold’s uptrend remains intact, although a short-term pullback may be necessary before it resumes its ascent. Traders will be closely watching the Fed’s decision and economic projections to guide the next move for the precious metal.