Gold prices, represented by XAU/USD, faced challenges in capitalizing on early gains during Monday’s trading, retreating to the lower end of the intraday range in the first half of the European session. The initial market reaction to Iran’s attack on Israel over the weekend, which initially bolstered gold, faded quickly, reflecting a generally positive tone in equity markets.
This shift in market sentiment, coupled with expectations of a delay in interest rate cuts by the Federal Reserve (Fed), served as key factors dampening demand for the safe-haven precious metal. Market participants have revised their expectations for the timing of the first interest rate cut by the Fed from June to September, citing persistent inflationary pressures. Consequently, elevated US Treasury bond yields have limited fresh bullish bets on gold, which lacks yield.
However, despite these headwinds, the risk of a broader conflict in the Middle East stemming from Iran’s attack on Israel continues to loom over markets. This geopolitical tension, combined with subdued demand for the US Dollar (USD), may provide some support to the commodity in the near term.
As market dynamics continue to evolve, investors will closely monitor developments in the Middle East and any shifts in central bank policies for further cues on the direction of gold prices.
