Gold prices briefly retreated from fresh two-month highs just above $3,450 early Monday as buyers took a moment to catch their breath. Market focus remains sharply tuned to escalating geopolitical tensions in the Middle East and ongoing trade headlines, which continue to provide directional cues for gold’s next move.
Gold Eyes $3,500 Despite Temporary Pullback
The US Dollar regained some ground in Asian trading Monday, strengthening against major currencies as investor confidence wavered amid geopolitical concerns. This Dollar resilience contributed to the slight pullback in gold prices, with the yellow metal momentarily stepping back from its recent surge.
Over the weekend, the intensifying conflict between Israel and Iran drove market jitters. Fresh Iranian missile attacks on Israel have kept risk sentiment fragile, even as markets attempt to absorb the developments and shift their gaze toward key central bank policy announcements scheduled later this week.
On Sunday, Israel’s air force targeted surface-to-surface missile sites in central Iran, escalating fears of a broader regional confrontation that could jeopardize critical trade routes, notably the Strait of Hormuz. Compounding uncertainty, Iran has signaled to mediators that it is unwilling to negotiate a ceasefire with the US while under Israeli attack.
Adding a further layer of complexity, Reuters reported that former US President Donald Trump vetoed a recent Israeli plan to assassinate Iran’s Supreme Leader, Ayatollah Ali Khamenei, citing two US officials. These geopolitical flashpoints continue to keep gold’s safe-haven appeal elevated.
Gold Buyers Face Short-Term Exhaustion
Gold’s impressive 4% rally last week has prompted some profit-taking and caution among buyers ahead of the Federal Reserve’s policy decision on Wednesday. Market consensus anticipates that the Fed will hold rates steady for now, but expectations remain high for the first rate cut of the year by September. Analysts are pricing in two 25 basis point reductions by year-end.
This dovish Fed outlook is a key support factor for gold, alongside the ongoing Middle East tensions. However, the metal appears to be in a holding pattern, awaiting fresh catalysts for a renewed push higher.
Economic Data and Central Bank Watch
Monday’s Chinese Retail Sales and Industrial Production data failed to provide additional momentum for gold, shifting attention instead toward the US Retail Sales report and the Bank of Japan’s policy decision due Tuesday.
The BoJ’s stance could inject volatility into the USD/JPY currency pair, which in turn may influence the US Dollar’s strength and subsequently impact gold prices, given gold’s inverse relationship with the greenback.
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