Gold prices are maintaining a positive trend for the second consecutive day, trading near the $3,360 mark, despite a slight pullback from a nearly two-week high reached during the Asian session. Although signs of easing trade tensions between the U.S. and China have emerged, U.S. President Donald Trump’s unpredictable trade policies continue to keep investors cautious. Alongside this, ongoing geopolitical risks, particularly from the Russia-Ukraine conflict and Middle Eastern tensions, are driving safe-haven demand for gold.
Meanwhile, the U.S. dollar (USD) is struggling to attract significant buying interest amidst growing economic uncertainty, further supporting gold’s price. However, traders are exercising caution and refraining from making aggressive bullish moves in the XAU/USD pair ahead of the crucial U.S. Federal Open Market Committee (FOMC) policy meeting starting Tuesday.
Market Drivers: Trade and Geopolitical Risks Keep Gold Supported
President Trump, speaking to reporters aboard Air Force One on Sunday, hinted at potential trade agreements with specific countries, although he did not name them. He also signaled openness to reducing tariffs imposed on China. In response, China’s Commerce Ministry confirmed on Friday that it is evaluating the possibility of trade talks with the U.S., fueling optimism that tensions between the two largest global economies may ease, supporting a generally positive market tone.
Additionally, the U.S. Institute for Supply Management (ISM) reported that growth in the U.S. services sector accelerated in April, with the ISM Services PMI rising to 51.6, surpassing both the previous month’s 50.8 and the anticipated 50.6. This, combined with positive U.S. job data from the previous week, helped alleviate recession fears and provided some support for the U.S. dollar.
Despite these positive developments for the dollar, gold continues to benefit from safe-haven flows due to concerns over Trump’s trade policies and escalating geopolitical tensions. On Sunday, Trump announced a 100% tariff on films produced overseas, further complicating trade relations.
On the geopolitical front, tensions have intensified as Russia reported multiple drone strikes from Ukraine, forcing the closure of major airports in Moscow. Ukrainian forces are also making advances in the Kursk region, while Israel, reportedly in coordination with the U.S., launched airstrikes on Yemen’s Hodeidah port following an attack on Israel’s Ben Gurion International Airport by Houthi rebels. These developments have added further upward pressure on gold prices.
Traders Await FOMC Meeting for Policy Direction
Looking ahead, market participants are focusing on the two-day FOMC meeting starting Tuesday, with reduced expectations for a rate cut in June. The policy statement, along with remarks from Federal Reserve Chair Jerome Powell on Wednesday, will be closely scrutinized for hints about the central bank’s future rate policy and its impact on gold.
Technical Outlook: Bulls Eye Key Fibonacci Levels
From a technical perspective, gold prices have moved above the $3,350 resistance, coinciding with the 50% Fibonacci retracement of the recent pullback from all-time highs. Positive oscillators on the daily chart suggest that the path of least resistance remains to the upside. Traders will be watching for a breakout above the 61.8% Fibonacci level, around the $3,385 region, to confirm further bullish momentum. If this level is cleared, the next significant resistance lies near $3,400, with potential for a move towards $3,425. A sustained rally could push prices toward the psychological $3,500 level.
On the downside, the $3,350 area is expected to provide initial support, with the daily low around $3,325 acting as a key threshold. If this level is breached, the $3,300 mark may come into focus, followed by the $3,275-3,270 range. A decisive break below $3,270 could trigger a technical sell-off, pushing prices towards the $3,245-3,244 zone, with the potential for a further decline to the $3,200 level, a low not seen since mid-April.
As gold prices continue to be influenced by trade dynamics and geopolitical risks, traders are carefully monitoring key technical levels and awaiting clearer signals from the FOMC meeting later this week.
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