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Gold price jumps to a record high, rising geopolitical tensions in focus

  • Gold price gains ground after reaching a record high on Monday. 
  • The hopes for Fed rate cuts and escalating Middle East tensions boost safe-haven assets like gold. 
  • Federal Reserve officials Bostic, Barr, Waller, Jefferson, and Mester are set to speak on Monday. 

The gold price (XAU/USD) gains momentum on Monday. The yellow metal hit a record high near $2,450 during the European session on Monday amid renewed hopes for interest rate cuts from the US Federal Reserve (Fed) and rising geopolitical tensions in the Middle East. Meanwhile, heightened tensions between Russia and Ukraine also bolstered safe-haven demand, with both nations launching attacks against each other over the weekend.

Later on Monday, gold traders will focus on the Federal Reserve’s (Fed) Bostic, Barr, Waller, Jefferson, and Mester speeches, which might offer some insight into the future path of monetary policy. The cautious approach or hawkish comments from Fed officials could limit the precious metal’s upside. 

Daily Digest Market Movers: Gold price edges higher amid geopolitical risks and uncertainties in the Middle East

  • Iranian state television is reporting that there is “no sign of life” at the crash site of the helicopter carrying Iran's President Ebrahim Raisi, according to Reuters.
  • Richmond Fed President Thomas Barkin noted that inflation is easing but highlighted that it will "take more time" to reach the Fed’s 2% target.
  • Cleveland Fed President Loretta Mester said that the Fed's current monetary policy stance is appropriate as it continues to assess incoming economic data. 
  • Fed Governor Michelle Bowman said the policy is restrictive, but she is willing to hike rates if inflation stalls or reverses.
  • Financial markets have priced in 10% odds of a cut in June and a nearly 80% chance in September, according to the CME FedWatch tool.
  • The People's Bank of China (PBoC) added 60,000 troy ounces of gold to its stash in April, marking the 18th straight month of gold purchases, according to official data released Tuesday.

Technical Analysis: Gold price keeps the bullish vibe, focus on overbought RSI condition

Gold price trades with a positive bias on the day. The precious metal breaks above an ascending trend channel that has formed since May 2. Technically, the yellow metal maintains the bullish outlook unchanged on the four-hour chart as it is above the 100-period Exponential Moving Average (EMA), with the Relative Strength Index (RSI) holding above the midline around 82.50. Nonetheless, the overbought RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term gold upside. 

An all-time high of $2,440 acts as an immediate resistance level for XAU/USD. A decisive break above this level will see a rally to the potential upside barrier at the $2,500 psychological level. 

On the flip side, the resistance-turned support level at $2,415 will be the first downside target for the yellow metal. The crucial contention level is located at the $2,400 round number, followed by a low of May 16 at $2,370. 

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

 USDEURGBPCADAUDJPYNZDCHF
USD -0.05%0.04%0.04%0.05%-0.01%0.16%0.06%
EUR0.04% 0.09%0.09%0.12%0.05%0.23%0.11%
GBP-0.05%-0.10% 0.00%0.00%-0.05%0.12%0.01%
CAD-0.04%-0.09%0.03% 0.01%-0.04%0.12%0.02%
AUD-0.05%-0.10%0.00%-0.01% -0.06%0.11%0.01%
JPY0.02%-0.03%0.06%0.04%0.04% 0.16%0.06%
NZD-0.16%-0.21%-0.11%-0.12%-0.11%-0.17% -0.10%
CHF-0.08%-0.12%-0.02%-0.02%-0.01%-0.06%0.10% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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