Gold Price Edges Higher as US Dollar Softens Amid Geopolitical Tensions

Gold prices (XAU/USD) rose on Tuesday, bouncing off two-week lows of $2,325, driven by a weaker US Dollar and safe-haven demand amid ongoing geopolitical tensions in the Middle East. Despite higher short-term Treasury yields fueled by hawkish Federal Reserve minutes and stronger US economic data, the Gold price remained buoyant as traders awaited key US inflation data scheduled for release later this week.

Key Market Events and Data Releases

The US Conference Board’s Consumer Confidence Index is due on Tuesday, alongside speeches from Federal Reserve officials Neel Kashkari, Mary Daly, and Lisa Cook. The Core Personal Consumption Expenditures (Core PCE) Price Index, the Fed’s preferred inflation gauge, will be the focal point on Friday. Any hawkish remarks from Fed officials or signs of persistent inflation could shift market expectations away from an anticipated Fed rate cut, potentially boosting the USD and applying downward pressure on gold prices.

Market Sentiment and Economic Data

Recent geopolitical developments have influenced market sentiment. On Monday, an Israeli airstrike in the Gazan city of Rafah resulted in 45 casualties, prompting calls from global leaders for a cessation of hostilities in line with a World Court order, according to Reuters.

Minutes from the latest Federal Reserve meeting indicated a prolonged period before achieving the targeted 2% inflation rate. Consequently, traders have reduced their expectations for a Fed rate cut in September, with odds falling to 49% from 63% a week earlier, as per the CME FedWatch Tool.

Preliminary estimates for the US Gross Domestic Product (GDP) annualized growth in Q1 suggest a deceleration to 1.4%, down from the previous 1.6%. The Core PCE Price Index for April is expected to show a 0.3% month-on-month increase and a 2.8% year-on-year rise, underscoring persistent inflationary pressures.

Analyst Projections and Technical Analysis

UBS analysts have raised their gold price projection to $2,600 by the end of 2024, while Citi experts forecast gold reaching $3,000 per ounce within the next six to eighteen months.

Technically, gold maintains a positive outlook in the long term. The 1-hour chart shows that gold continues to trade above the key 100-day Exponential Moving Average (EMA), reinforcing a bullish sentiment. However, the 14-day Relative Strength Index (RSI) hovers around the 50-midline, indicating a neutral stance that could signal potential consolidation.

Immediate resistance is found at the upper boundary of the Bollinger Band at $2,430. Breaking this level could attract buyers towards the all-time high of $2,450 and the psychological barrier of $2,500. On the downside, initial support is expected at the $2,300 round mark, with further declines possibly targeting $2,268 and the 100-day EMA at $2,220.

US Dollar Performance

As shown in the table below, the US Dollar (USD) exhibited varied performance against major currencies, weakening the most against the Australian Dollar.