Gold price remains steady above the $2,000 mark, benefiting from geopolitical tensions in the Middle East. However, the overbought RSI limits further gains before this week’s key events and data. The price of gold (XAU/USD) surpassed the $2,000 mark on Friday, reaching its highest level since May 16 and achieving a third consecutive weekly gain. The ongoing conflict between Israel and Hamas continues to drive safe-haven buying and support for the precious metal. However, elevated US Treasury bond yields, driven by expectations of further tightening by the Federal Reserve (Fed), support the US Dollar (USD) and keep gold bulls cautious during the Asian session on Monday. Despite the lack of significant selling pressure, aggressive bearish traders should exercise caution before expecting a significant correction in the commodity. Traders are also reluctant to take aggressive positions on the gold price and prefer to wait on the sidelines ahead of central bank events this week. The Bank of Japan (BoJ) will announce its policy decision on Tuesday, followed by the Federal Reserve (Fed) monetary policy update on Wednesday and the Bank of England (BoE) meeting on Thursday. Investors will also pay attention to the official PMIs from China, EuroZone GDP and CPI data, and the US monthly jobs report (NFP) for potential impact on the gold market.
In terms of technical analysis, the daily chart shows that the Relative Strength Index (RSI) is slightly overbought, which may limit further bullish momentum for gold. Therefore, it would be wise to wait for consolidation or a small pullback before expecting an extension of the recent uptrend. If a corrective decline occurs, there is strong support around the $1,986-1,985 level. Below that, the gold price could drop further towards the $1,972 support zone. On the other hand, a break above the $2,005 level (Friday’s high) could push gold towards the next resistance at around $2,022.
The heat map displays the percentage changes of major currencies against each other. The weakest performance of the US Dollar (USD) is seen against the New Zealand Dollar (NZD).
The Federal Reserve (Fed) is responsible for shaping monetary policy in the US, with its main mandates being achieving price stability and promoting full employment. The Fed adjusts interest rates to achieve these goals. When inflation is too high, interest rates are raised to increase borrowing costs and strengthen the USD. When inflation is low or unemployment is high, the Fed may lower interest rates to encourage borrowing and weaken the USD. The Fed holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) makes monetary policy decisions based on economic conditions. In extreme situations, the Fed may implement Quantitative Easing (QE), which involves increasing the flow of credit in the financial system. QE usually weakens the USD. On the other hand, Quantitative Tightening (QT) is the opposite of QE, where the Fed stops buying bonds and does not reinvest the principal, which typically strengthens the USD.
