During the first half of the European session, the price of gold (XAU/USD) maintained its robust intraday gains, hovering around the $2,257-$2,258 region. This positioning is just below the record peak reached earlier this week. The release of the US Personal Consumption Expenditures (PCE) Price Index on Friday, indicating a moderate rise in inflation, has reaffirmed expectations that the Federal Reserve (Fed) will commence interest rate cuts starting in June. This, coupled with ongoing geopolitical risks stemming from the prolonged Russia-Ukraine conflict and recent tensions in the Middle East, continues to fuel demand for the non-yielding yellow metal.
Despite this bullish sentiment, there has been a brief pause in buying activity due to the prevailing risk-on environment and some dip-buying in the US Dollar (USD). Such movements tend to undermine the appeal of safe-haven assets like gold, thus limiting further upward momentum. Additionally, extremely overbought conditions observed on the daily chart contribute to the consolidation in gold prices.
Nevertheless, the fundamental backdrop suggests that the path of least resistance for XAU/USD remains tilted to the upside. Consequently, any corrective declines may be viewed as buying opportunities by traders. Market participants are now awaiting the release of the US ISM Manufacturing Purchasing Managers’ Index (PMI) for short-term direction.
As geopolitical tensions persist and expectations of Fed rate cuts linger, investors are likely to closely monitor economic indicators and central bank policies for cues on gold’s future trajectory. Amidst these uncertainties, gold’s status as a safe-haven asset is expected to keep it firmly supported, with any pullbacks viewed as opportunities for strategic entry into the market.
