Gold prices slipped during early European trading on Monday, snapping a three-day winning streak and retreating from their highest level in nearly two months. The decline comes as improving sentiment in equity markets tempers demand for the safe-haven asset, although lingering geopolitical risks and Federal Reserve expectations continue to offer support.
Spot gold (XAU/USD) held above the $3,400 threshold despite intraday losses, reflecting cautious investor sentiment amid a complex backdrop of global events. Market optimism, driven by gains in global equities, has weighed on bullion prices. Still, escalating tensions in the Middle East and expectations of future interest rate cuts by the Federal Reserve limited deeper declines.
Geopolitical Tensions Underpin Demand
The ongoing military confrontation between Israel and Iran remains a key driver of market uncertainty. On Sunday evening, Iran launched another wave of missiles and drones at Israel, prompting a renewed military response. The exchange of deadly strikes continued into Monday, with Israel vowing to intensify operations against Iranian targets.
These developments initially pushed gold to an intraday high during Asian trading, nearing $3,453, but the broader market reaction has remained muted. Asian equities advanced despite the heightened conflict, signaling investor preference for risk assets over traditional havens.
Fed Outlook in Focus Ahead of FOMC Meeting
Market participants are also awaiting signals from the Federal Reserve, which begins its two-day policy meeting on Tuesday. While the Fed is widely expected to leave interest rates unchanged, recent signs of easing inflation and a slowing U.S. economy have fueled speculation that rate cuts may begin in 2025.
The U.S. Dollar remains subdued, hovering near a three-week low, as traders remain cautious ahead of Wednesday’s policy announcement. A modest rebound in the greenback has also contributed to intraday selling pressure on gold.
Technical Outlook: $3,400 as Key Support
From a technical standpoint, gold’s recent breakout above $3,400 and the formation of an ascending trend channel suggest a bullish setup remains intact. Analysts view any pullback toward $3,400 as a potential buying opportunity, barring a decisive break below the $3,360 level, which marks the lower boundary of the trend channel. A move below this threshold could shift short-term momentum in favor of sellers.
Conversely, a sustained rally above the $3,453 resistance zone could open the door for a test of the all-time high near $3,500, last reached in April. A breakout above this level would likely trigger renewed buying interest and reinforce the broader bullish trend.
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