Gold prices surged to their highest level in over four weeks on Monday, driven by escalating geopolitical tensions and renewed trade concerns between the United States and China. The yellow metal rallied as investors sought safe-haven assets, with XAU/USD last trading at $3,377, up 2.7% on the day.
Geopolitical Risks and Tariff Tensions Fuel Gold Demand
Market sentiment turned risk-averse following reports of a Ukrainian aerial strike on Russian military assets, including long-range bombers. At the same time, U.S. President Donald Trump reignited trade fears by doubling tariffs on steel and aluminum imports to 50%, effective June 4, while intensifying his rhetoric against China. Global equity markets declined in response.
According to CNBC, a call between Trump and Chinese President Xi Jinping may occur this week, although it is not expected on Monday.
Data Mixed as Focus Shifts to NFP Report
On the economic front, the ISM Manufacturing PMI for May dipped to 48.5, slightly below April’s 48.7 and the lowest reading since November. While overall business activity slowed, the Prices Paid Index remained in expansion, and the Employment Index improved modestly from 46.5 to 46.8.
The S&P Global Manufacturing PMI also showed ongoing expansion but declined to 52.0, down from 52.3 in April.
Meanwhile, the Atlanta Fed’s GDPNow model sharply revised its Q2 2025 growth estimate from 3.8% to 4.6%, reflecting stronger-than-expected data inputs.
Market participants continue to monitor macroeconomic developments closely ahead of Friday’s critical Nonfarm Payrolls (NFP) report, which could shape expectations for future Federal Reserve policy.
Fed Commentary Adds to Gold’s Tailwinds
Additional support for gold came from Federal Reserve Governor Christopher Waller, who stated that while inflation remains the Fed’s priority, interest rate cuts could still be on the table later this year. His slightly dovish tone added pressure on the U.S. Dollar, further fueling gold’s rally.
Market Movers: US Dollar Weakens, Yields Rise
The U.S. Dollar Index (DXY) fell 0.72% to 98.71, reflecting broad weakness against major currencies.
U.S. 10-year Treasury yields rose nearly six basis points to 4.458%, with real yields also climbing to 2.118%.
Money markets are now pricing in 51 basis points of Fed rate cuts by year-end, according to Prime Market Terminal data.
Technical Outlook: Bulls Eye $3,400 and Beyond
Gold’s breakout above $3,370 suggests a strong bullish bias. The Relative Strength Index (RSI) shows rising momentum, and a sustained move above $3,400 would expose resistance at $3,438 (May 7 high), with a longer-term target at the record high of $3,500.
On the downside, a break below $3,300 could shift the short-term trend, opening the door for declines toward $3,250, followed by the 50-day Simple Moving Average (SMA) at $3,228, and further support at $3,167.
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