Gold prices (XAU/USD) are gaining strength on Monday, supported by a weaker US Dollar (USD) and escalating geopolitical tensions in the Middle East. In the longer term, increasing demand for gold by central banks is expected to bolster the precious metal. However, the prospect of reduced bets on a Federal Reserve (Fed) rate cut this year and a hawkish stance from Fed officials might exert downward pressure on XAU/USD. Rising interest rates typically make gold less attractive as a store of value.
The US markets are closed on Monday in observance of Memorial Day, reducing trading volume. Gold traders are looking ahead to the Fed’s speeches on Tuesday, with remarks expected from officials including Michelle Bowman, Loretta Mester, and Neel Kashkari. These speeches could provide further direction for gold prices.
Additionally, the first reading of the US Gross Domestic Product (GDP) for the first quarter will be released on Thursday. The GDP is estimated to expand by 1.5% in Q1. Stronger-than-expected GDP data might strengthen the USD, thereby exerting additional pressure on USD-denominated gold.
Overall, while the current environment supports gold prices, the outlook remains mixed due to potential shifts in Fed policy and economic indicators.
