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Gold price jumps over 1% on Monday as markets begin the week with caution ahead of the Fed's interest rate decision.
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Geopolitical tensions involving Trump and Israel are driving investors back into Gold.
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Despite a shift in sentiment towards the downside, upside risks remain.
Gold (XAU/USD) gains more than 1% on Monday as traders flock to safe-haven assets following a tumultuous weekend in geopolitics. The Houthi attack on Ben Gurion Airport and Israel's vow to retaliate while preparing for a ground offensive in Gaza have heightened regional risks. Additionally, US President Donald Trump’s comments on possibly using military action to take control of Greenland add to the uncertainty.
Gold’s allure grows as markets prepare for the Federal Reserve’s rate decision on May 7. Over the weekend, Trump reiterated his discontent with the Fed and its Chairman Jerome Powell, calling him “stiff” and urging the Federal Open Market Committee (FOMC) members to pressure Powell for rate cuts.
According to the Chicago Mercantile Exchange (CME) Fedwatch tool, no rate cut is expected this Wednesday. While recent Nonfarm Payrolls data and other economic reports show signs of easing in the US economy, it is not in a downturn. This could provide Fed Chairman Powell with leverage to resist political pressure and signal to the markets that rates will remain steady for an extended period before considering cuts.
Daily Digest Market Movers: Closed Off Monday
- Several Asian markets and the United Kingdom are closed for a public holiday on Monday.
- In the Gold mining sector, there was significant news with Gold Road Resources agreeing to be acquired for $3.7 billion by South African company Gold Fields, following the sweetening of Gold Fields' offer, ending a public dispute between the joint venture partners, according to the Financial Review.
- The CME FedWatch tool indicates that there is a 5.2% chance of an interest rate cut by the Federal Reserve at May's meeting, with a 94.6% likelihood of no change. For June, the probability of a rate cut stands at 46.6%.
Gold Price Technical Analysis: Promises Made
Gold prices surged on Monday as the US Dollar weakened at the start of the trading day, with both assets moving in tandem ahead of the Federal Reserve’s rate decision. Typically, higher or steady rates are negative for Gold as bond interest returns become more attractive, but a shift in this narrative could occur. If rates stay elevated, it may weaken the US economy, leading to stagflation or a recession, positioning Gold as a better hedge against these risks.
On the upside, the R1 resistance at $3,265 was breached in early trading, and with continued momentum, the R2 resistance at $3,337 may be too far. However, intermediate resistance levels at $3,290 (May 1 high) and $3,320 (April 30 high) could serve as targets for further upward movement.
On the downside, the pivot at $3,244 and the technical support at $3,245 should hold. If Gold prices dip further, key support levels are found near $3,219 (S1) and $3,197 (S2) for Monday’s intraday trading.
