The price of gold (XAU/USD) has displayed consecutive days of positive momentum on Tuesday, making steady gains as it approaches the $2,040-2,042 supply zone during the first half of the European session. However, concerns about escalating tensions in the Middle East potentially triggering a broader regional conflict have somewhat tempered recent market optimism.
The ongoing geopolitical uncertainties have contributed to supporting the non-yielding yellow metal, along with a notable decline in US Treasury bond yields. The fear of a wider war in the Middle East has acted as a counterbalance to the positive market sentiment.
Despite the supportive factors for gold, the emergence of US Dollar (USD) buying could limit aggressive bullish bets in the market. Traders may exercise caution, especially with the upcoming Federal Open Market Committee (FOMC) monetary policy meeting scheduled to start on Tuesday. The FOMC meeting is crucial, as it may provide insights into future rate decisions, shaping the directional movement of XAU/USD.
Investors are likely to adopt a wait-and-see approach, observing the outcome of the FOMC meeting before making significant moves in the gold market. This cautious stance is warranted to avoid potential whipsaw movements and to better position for any fresh directional impetus that may arise following the central bank event.
As traders navigate the central bank event risk, attention will also be on the US economic docket, featuring the release of the Conference Board’s Consumer Confidence Index and JOLTS Job Openings data on Tuesday. These economic indicators, coupled with movements in US bond yields, will influence the dynamics of the USD and, consequently, impact gold prices. Additionally, the broader risk sentiment prevailing in the markets will contribute to shaping short-term trading opportunities around the safe-haven metal.
