Gold (XAU/USD) struggles to gain significant traction on Monday but remains close to its record high above the $3,000 psychological level, reached on Friday. Concerns over escalating global trade tensions and geopolitical risks continue to support the safe-haven metal, while expectations of further Federal Reserve interest rate cuts add to its appeal.
The U.S. dollar remains under pressure near a multi-month low as traders anticipate a more dovish stance from the Fed. The central bank is widely expected to lower interest rates multiple times this year amid concerns over an economic slowdown exacerbated by U.S. President Donald Trump’s aggressive trade policies. Fed funds futures indicate potential 25-basis-point rate cuts in June, July, and October.
Despite gold’s strong fundamentals, a positive sentiment in Asian equity markets—driven by China’s newly announced stimulus measures—limits further gains for XAU/USD. On Sunday, China’s State Council unveiled an initiative to boost household incomes and ease property market restrictions, aimed at reviving domestic consumption.
Geopolitical Tensions Support Gold’s Safe-Haven Appeal
Rising geopolitical tensions continue to drive demand for gold. In the Middle East, Houthi leader Abdul Malik al-Houthi vowed to escalate attacks on U.S. ships in the Red Sea following deadly U.S. airstrikes. In response, U.S. Defense Secretary Lloyd Austin reaffirmed that the U.S. would continue targeting the Houthis until they cease their assaults on shipping, increasing fears of a prolonged conflict.
Meanwhile, in Gaza, an Israeli drone strike killed at least nine people, including three journalists, on Saturday. The Israeli military stated that the attack was aimed at neutralizing threats from armed militants despite the ceasefire that has been in effect since January 19.
Traders Await Fed Decision and Key U.S. Economic Data
Investors remain cautious ahead of the Federal Open Market Committee (FOMC) policy meeting, which begins on Tuesday. Monday’s release of U.S. retail sales data and the Empire State Manufacturing Index could provide further market direction, but the Fed’s rate decision on Wednesday remains the primary focus for gold traders.
Technical Outlook: Consolidation Before the Next Move?
From a technical perspective, gold’s recent breakout above the $2,928-$2,930 resistance zone has reinforced its bullish momentum. However, the daily Relative Strength Index (RSI) is nearing overbought territory, suggesting that traders may wait for some consolidation before initiating new long positions.
Key support levels lie near $2,956, with a break below potentially dragging prices toward the $2,930-$2,928 region. A decisive move below this area could trigger technical selling, pushing gold toward $2,900 or even last week’s low of $2,880. Nonetheless, the broader trend remains firmly bullish, with any pullbacks likely to be viewed as buying opportunities.
