Gold Prices Fall Back from Two-Month Highs Due to Geopolitical Tensions and Uncertainty over Fed Policy
Gold prices fell back slightly after hitting almost a two-month high during the Asian session, as a upbeat risk appetite in equity markets took its toll on the safe-haven commodity. In spite of the decline, persistent geopolitical tensions in the Middle East, especially the renewed hostilities between Israel and Iran, still provide support for gold. Also, market participants are holding back in the lead-up to the next Federal Reserve policy meeting, due to give new guidance on interest-rate reductions with evidence of easing U.S. inflation. As a moderate gain in the U.S. dollar places a limit on further advancement, overall gold’s downside is circumscribed, technicals indicating that any slide will offer new buying opportunities. KEY LOOKOUTS • Markets are waiting for the Federal Reserve’s interest rate prognosis, and this may have a strong impact on the U.S. dollar as well as gold prices. • The Israeli-Iran conflict persists in offering safe-haven support to gold amidst general market uncertainty. • Any major movement in the USD, particularly around its recent lows, could have a direct bearing on direction of gold prices. • Major resistance is at the $3,452-$3,500 level, and support around $3,400 and $3,360 levels of the uptrend channel. Gold prices have softened slightly after hitting a two-month high, weighed down by the positive sentiment in Asian equities. Nevertheless, the metal still finds support in heightening Middle Eastern tensions and ongoing global trade uncertainty. Investors are also eyeing closely the next Federal Reserve policy meeting, which may give new signals about future interest rate cuts as there were signs of slowing U.S. inflation. Although the U.S. dollar’s modest recovery has limited some of gold’s advances, the downside is still constrained as traders remain jittery in anticipation of major economic and geopolitical events. Gold prices drop back from two-month high as Asian stocks climb, but safe-haven buying continues amidst tensions in the Middle East. FOMC meeting awaited for direction on prospective U.S. interest rate cuts, capping the downside for gold. • Gold prices decline slightly after reaching a two-month high in Asian trading. • Encouraging risk appetite in the equity markets suppresses the safe-haven demand for gold. • Geopolitical tensions between Iran and Israel continue to underpin gold prices. • Traders tread carefully in anticipation of next week’s FOMC policy decision. • The Federal Reserve is likely to leave the rates unchanged but is likely to indicate future cuts as inflation weakens. • The U.S. dollar gets a modest boost, capping gold’s near-term upside. • Key levels are resistance at $3,452-$3,500 and support at $3,400-$3,360. Gold prices are seeing mild pressure after they hit their highest level in almost two months. The positive mood in the Asian equity markets has somewhat reduced the allure of the safe-haven metal. Nevertheless, the prevailing geopolitical tension between Iran and Israel remains a driving force for investor demand for safer assets. The military skirmishes between the two countries have intensified, with both sides firing at each other, contributing to global market anxiety and sustaining gold in general support. XAU/USD DAILY PRICE CHART SOURCE: TradingView In the meantime, attention is turning to next week’s Federal Reserve policy meeting. The central bank is expected to keep interest rates on hold but investors are seeking clues over potential future cuts after inflation slowed and the economy was shown to have pockets of weakness. The Fed’s guidance will be influential in setting up expectations for the rest of the year, and any dovish sentiments can further impact the U.S. dollar and, consequently, gold prices. TECHNICAL ANALYSIS Gold broke above the $3,400 threshold recently, indicating bullish vigor underpinned by the development of a rising trend channel on short-term charts. Bulls are still in control according to positive oscillators on the daily chart, and resistance is found at the $3,452-$3,453 levels. A distinct breakout above this level could potentially lead to a retest of the all-time high around the $3,500 psychological level. On the other hand, any pullback would likely find firm support around $3,400, and a sustained fall below $3,360 would invalidate the bullish setup, and it could switch the near-term bias towards sellers. FORECAST Should gold be able to break over the recent high in the $3,452-$3,453 region, it would potentially set the stage for a challenge of the psychological $3,500 mark. A convincing move above this obstacle might invite new buying interest and drive prices still higher, potentially continuing the current bullish trend. Ongoing geopolitical tensions or a dovish Federal Reserve comment could serve as catalysts for sustained upside momentum. On the negative side, nearest support is seen at the $3,400 level, and subsequent weakness could push gold down towards the $3,360 zone, which is the lower end of the current uptrend channel. A move below this level with some conviction would change market sentiment and attract more selling pressure, potentially creating a more severe correction in the near term.
