Gold (XAU/USD) continues its upward momentum, trading near its all-time peak of $3,010 during Tuesday’s early European session. The precious metal’s price remains buoyed by ongoing geopolitical risks, fears of a US recession, and persistent uncertainty surrounding US policies under President Donald Trump. This marks the fifth positive day in the last six for gold, with market expectations growing that the Federal Reserve will implement multiple rate cuts throughout the year.
Despite a generally risk-on market sentiment, which is bolstered by optimism around China’s economic stimulus and potential progress in peace talks regarding Ukraine, gold prices remain resilient. A minor bounce in the US Dollar (USD) from a multi-month low on Monday has not deterred gold’s upward trajectory, suggesting the path of least resistance for the precious metal is still to the upside. However, traders appear cautious, with many likely to hold off on new bullish positions ahead of the Federal Open Market Committee’s (FOMC) two-day meeting, which begins on Wednesday.
Market Overview: Geopolitical Tensions and Economic Uncertainty Drive Gold Higher
Geopolitical tensions have escalated, particularly in the Middle East, as the Israel Defense Forces (IDF) have launched “extensive strikes” on the Gaza Strip, targeting what they describe as “terror targets” associated with Hamas. These strikes follow unsuccessful talks in Qatar to extend a Gaza ceasefire, heightening the risk of further conflict.
In the US, economic concerns were reignited after Treasury Secretary Scott Bessent indicated that there were no guarantees the economy would avoid a recession this year. This renewed economic anxiety has further bolstered the demand for safe-haven assets like gold, pushing prices to a fresh all-time high during the Asian session on Tuesday.
Economic data from the US also supported gold’s upward trajectory. The US Census Bureau reported a modest 0.2% increase in retail sales for February, well below the expected 0.7% growth and a sharp contrast to the prior month’s revised 1.2% decline. This weak data has fueled expectations that the Fed will resume its rate-cutting cycle. Fed fund futures indicate the central bank could reduce borrowing costs by 25 basis points at its meetings in June, July, and October, potentially capping the US Dollar’s recovery and acting as a tailwind for gold.
Despite this, there is some optimism surrounding a potential peace deal between Russia and Ukraine, as US President Donald Trump expressed hopes for a ceasefire and a resolution. Additionally, the market has been buoyed by China’s recent stimulus measures. These developments contribute to an overall upbeat market mood, even as traders remain cautious ahead of upcoming US economic data releases, including Building Permits, Housing Starts, and Industrial Production on Tuesday. The main event will be the FOMC meeting on Wednesday, which could significantly influence USD demand and provide fresh direction for gold prices.
Technical Analysis: Bullish Momentum Remains, but Caution Advised
From a technical standpoint, the price’s hold above the psychological $3,000 mark is seen as a key bullish signal. However, the daily Relative Strength Index (RSI) is starting to show slightly overbought conditions, suggesting that traders might consider waiting for a brief consolidation or a pullback before entering new positions.
In terms of support and resistance levels, any pullback to the immediate support zone around $2,980-$2,978 could present a buying opportunity, with the next key support seen near the $2,956 level. A significant break below this level could lead to technical selling, pushing gold toward the $2,930-$2,928 range, with further declines possibly testing the $2,900 mark or last week’s swing low around $2,880.
As traders await the outcome of the FOMC meeting, gold’s prospects for further gains remain strong, but caution is warranted as the market evaluates the next moves by the US central bank and global economic developments.
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