Gold prices extended their rebound on Monday, with spot gold (XAU/USD) rising for a second consecutive session and hovering near $4,100 per ounce during Asian trading hours. The main driver behind the increase was a sharp decline in crude oil prices, which eased concerns about a resurgence in inflation, while investors also recalibrated their expectations for the future interest rate paths of major global central banks.
Where to start
Previously, ongoing tensions in the Middle East had fueled fears of potential energy supply disruptions, pushing oil prices higher and adding to global inflationary pressures. If energy prices remained elevated for an extended period, it could have forced major central banks to maintain a tight policy stance, thereby raising the opportunity cost of holding non-yielding assets like gold. However, with signs of a de-escalation in the conflict, crude oil prices have pulled back significantly, reducing concerns about inflation risks. The decline in oil prices has weakened the expectation of sustained high interest rates, providing support for a short-term rebound in gold.
The United States paused its military operations for two weeks, which led to an improvement in market risk sentiment. The U.S. stated that while its forces remain on alert, it aims to leave room for potential negotiations. Simultaneously, Iran has also paused further actions against U.S. allies, temporarily easing market fears of a wider conflict.
However, demand for safe-haven assets has not been completely eliminated from the gold market. Due to the ongoing uncertainty in the Middle East, investors continue to monitor progress in diplomatic efforts. If tensions escalate again, the risk to energy supply could once again drive up inflation expectations and enhance gold's appeal as a safe-haven asset. Geopolitical risks remain a key support factor keeping gold prices elevated.
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This week, markets are facing a dense calendar of economic events that could act as key catalysts for the direction of precious metals. Investors will be closely watching policy meetings of the Federal Reserve, the Bank of England, and the Bank of Japan. Meanwhile, U.S. economic growth data, core PCE inflation data, and inflation indicators from Europe and Australia will also be released. The Federal Reserve's policy signals are particularly highly anticipated by the market. Since gold prices are sensitive to the U.S. dollar's movements and interest rate expectations, if the Fed delivers a dovish signal, the market could reduce the appeal of dollar-denominated assets, thereby pushing gold higher. Conversely, if the policy statement indicates that inflation risks remain high and reinforces expectations for interest rates to stay elevated, gold could face some pressure.
U.S. economic data will also influence market assessments. Strong U.S. GDP growth could reduce concerns about an economic slowdown and support the U.S. dollar, while the core PCE inflation data will directly impact the Fed's assessment of future policy adjustment space. The economic data and central bank policy signals this week will be the core drivers of short-term gold price trends.
From a global investment perspective, gold remains in an environment of multiple converging factors. On one hand, geopolitical risks, central bank gold purchases, and safe-haven capital inflows provide support for prices. On the other hand, the U.S. dollar's strength or weakness and real interest rate levels still limit the upside potential for gold. Therefore, investors need to focus on macro policy changes, rather than relying solely on single risk events to drive prices.
On the daily chart, spot gold rebounded after finding support near the $4,000 level, and the price has now risen back to around $4,100, with short-term bullish momentum showing some recovery. The daily structure indicates that gold remains in a relatively strong range-bound pattern. The key resistance area lies between $4,150 and $4,200. A break above this zone could open the door for further upside. On the downside, support is seen at $4,050 and the $4,000 psychological level. A break below the $4,000 support could trigger a deeper correction. The daily trend is currently leaning towards a rebound, but traders need to watch the U.S. dollar's movement and changes in interest rate expectations.
On the 4-hour chart, gold's consecutive rebound has strengthened short-term buying, with the price firmly back above the $4,100 level. The MACD indicator shows that bullish momentum is gradually recovering, while the RSI indicator remains in the strong territory, suggesting that short-term market sentiment is improving. However, as the price approaches the previous resistance zone, some profit-taking may increase. If gold breaks through the $4,120 to $4,150 range, the short-term target could be a test of the $4,200 level. If the rally stalls, the price could pull back to the $4,060 to $4,080 area for support. The 4-hour structure currently shows that bulls are in control, but the market is likely to remain cautious ahead of the key economic data releases this week.
Market Summary
Gold's recent rally has been primarily driven by the decline in oil prices, easing inflation pressures, and safe-haven demand. The phased reduction in the intensity of the conflict between the U.S. and Iran has lowered the market's risk premium. However, geopolitical factors could still impact the precious metals market at any time. This week's global central bank meetings and key economic data will be important factors influencing gold's next move. If the Fed's policy stance is dovish, a weaker U.S. dollar could further push gold higher. Conversely, if inflation data reinforces high interest rate expectations, gold could face adjustment pressure. Overall, gold remains in a phase dominated by macroeconomic factors, and investors must closely monitor interest rate expectations, U.S. dollar trends, and changes in global risk events.
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