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Geopolitical Impact Dully Digested; Focus Shifts to Fed Rate Decision
Commodity
Middle East Situation
Summary:
Gold prices surged to $3,452 on Monday before retreating. The strength in gold prices reflects the heightened demand for safe-haven assets amid escalating geopolitical tensions and a broad-based US dollar weakness.
Sell
CLOSEDXAUUSD
End Time
3404.64
Entry Price
3287.00
TP
3475.00
SL
3396.39 +11.21 +0.33%
1815
Points
Profit
3287.00
TP
3386.49
CLOSING
3404.64
Entry Price
3475.00
SL
Fundamentals
During the Asian session on Monday, gold prices attracted some buying interest, breaking strongly through the $3,450 mark. The escalation of tensions in the Middle East and increasing expectations for a Fed rate cut propelled gold prices to their highest level in over a month.
Since the weekend, the ongoing conflict between Israel and Iran has intensified, sparking concerns over broader geopolitical ramifications in the region. In this environment of waning risk appetite, capital is flowing into defensive assets like gold. The market currently believes that if the conflict between Israel and Iran further escalates in the coming days, gold prices could reach new all-time highs.
Since the close on Friday, gold prices have recorded their best closing price since April 21 and have formed a bullish candlestick pattern. The Relative Strength Index (RSI) is currently trending upward, indicating that strong bullish momentum is building, and prices are expected to continue rising over the next few trading days. If gold prices break through $3,500, it will open up further upside potential, potentially reaching $3,600.
However, we believe that gold prices' failure to continue rising after Monday's gap-up opening and their subsequent retreat during the European session indicates that the market's heightened emotions have been digested. Meanwhile, investors' attention is shifting to this week's Federal Reserve meeting.
Although the Fed is expected to hold interest rates steady, investors will closely monitor any forward guidance on rate cuts, especially after the US released weaker-than-expected inflation data, which has further reinforced market expectations that the Fed could ease policy as early as September.
Additionally, market participants are awaiting the specific details of President Trump's next round of tariffs. Reports indicate that the White House is preparing to implement these trade measures in the coming weeks. These measures are key to assessing the overall economic outlook and also provide more trading opportunities for gold's trajectory.
Technical Analysis
Amid the escalation of weekend geopolitical conflicts, gold's safe-haven demand surged, causing prices to gap up on Monday and test the seven-week high of $3,452.
The strength in gold prices has buoyed market sentiment. Judging from the recent statements from both sides, we can assume that tensions may ease slightly but remain elevated, which will temporarily cap further upside in gold prices.
Although the technical picture on the daily chart remains firmly bullish, the upward momentum may slow due to some profit-taking and the stochastic indicator entering overbought territory. Meanwhile, gold prices' breakout above the May 7 high of $3,438 aligns with the structural transformation of a head-and-shoulders bottom pattern. Once this pattern is completed, the market may revert to a downward trend.
Trading Recommendations
Trading Direction: Sell
Entry Price: 3442
Target Price: 3287
Stop Loss: 3475
Deadline: July 01, 2025, 23:55:00
Support: 3408/3395/3378
Resistance: 3444/3447/3452
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