Gold prices (XAU/USD) experienced a surge on the first day of the week, extending its steady rise during the early part of the European session. The precious metal successfully breached the 50-day Simple Moving Average (SMA) barrier, with market participants eagerly anticipating a move beyond the $2,040-2,042 supply zone for potential further gains ahead of the upcoming Federal Open Market Committee (FOMC) decision scheduled for Wednesday.
A notable factor contributing to the positive momentum in Gold prices is the heightened geopolitical tensions in the Middle East, acting as a favorable tailwind for the safe-haven asset. This development has triggered a flight to safety, leading to a decline in US Treasury bond yields and providing additional support to XAU/USD. Concurrently, the US Dollar (USD) has maintained a position below the one-month high reached last week, offering minimal impetus to the precious metal.
Despite these bullish signals, there is a degree of caution among traders due to diminishing expectations for a more aggressive policy easing by the Federal Reserve (Fed) in 2024. This factor has the potential to act as a tailwind for the USD and could limit the upside for the non-yielding Gold price. As a result, prudent market participants are advised to exercise caution and await robust follow-through buying before confirming that Gold has potentially bottomed out, particularly in the proximity of the psychologically significant $2,000 mark.
