Gold eased slightly from a nearly two-month high early Friday but remained resilient above the $3,400 level amid escalating geopolitical risks and persistent demand for safe-haven assets.
The retreat comes as the U.S. dollar rebounded from its lowest level since March 2022, limiting gold’s upside for now. Nonetheless, growing investor concerns over an expanding Middle East conflict, along with expectations of further Fed rate cuts in 2025, continue to underpin gold’s bullish momentum.
Geopolitical Escalation Fuels Demand
Gold prices surged during the Asian session after Israel launched pre-emptive airstrikes on Iranian nuclear and military sites. Israeli Prime Minister Benjamin Netanyahu stated the operation aimed to neutralize Iran’s nuclear threat, prompting fears of a broader regional war.
Iran’s Supreme Leader Ayatollah Ali Khamenei vowed severe retaliation, calling the strikes a “crime,” while tensions soared amid conflicting reports on potential U.S. involvement, which Washington has denied.
Dollar Strength Pauses Gold Rally
Despite the safe-haven demand, the USD’s rebound capped further gold gains. The greenback firmed following muted U.S. Producer Price Index data, which rose just 0.1% in May, and amid speculation surrounding Trump-era tariff expansions, now extended to more household appliances and sustaining 55% tariffs on Chinese imports.
Technical Outlook Remains Bullish
Technically, gold remains within an ascending channel, with support at $3,385 and key resistance near the $3,500 all-time high last seen in April. A break above this resistance could trigger a renewed rally, while a drop below $3,330 would negate the bullish setup.
Looking Ahead
Traders will watch the University of Michigan Consumer Sentiment Index and Inflation Expectations for further cues, though the spotlight remains on Middle East developments and U.S. trade policy shifts.
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