Fueled by a weakening US Dollar and increasing Middle Eastern geopolitical tensions, gold prices continued their upward trend for the second consecutive day on Tuesday, with buyers showing strong momentum.
“Despite renewed optimism of the US reaching trade deals with some of its trading partners as early as this week, US President Donald Trump’s erratic trade policies continue to unnerve markets, allowing Gold price to recover lost ground,” Dhwani Mehta, analyst at FXStreet, said in a report.
Gold prices hit a two-week high on Tuesday, reaching $3,394 today, its highest level since April 23. Prices had fallen to a two-week low last week.
At the time of writing, the most-active gold contract on COMEX was at $3,367.44 per ounce, up 1.4% from the previous close.
Trump fuels safe-haven demand
US President Donald Trump announced late Monday that he intends to impose pharmaceutical tariffs within the next two weeks.
This announcement follows his signing of an executive order aimed at encouraging drug manufacturing within the US.
Additionally, Trump announced on Sunday a 100% tariff on movies produced overseas, though specifics regarding the implementation of this levy were scarce.
The US Dollar (USD) is still struggling to find significant buyer interest.
This lack of demand appears to be driven by increased economic uncertainty stemming from Trump’s tariffs.
Mehta said:
This turns out to be another factor lending some support to the Gold price.
Geopolitical tensions
Russian officials reported that Ukraine launched drone attacks on Moscow for the second consecutive night, leading to the shutdown of the city’s three main airports.
Additionally, Ukrainian forces were reportedly attempting to advance in Kursk and attacked a power substation in Russia’s western Kursk region.
Ongoing geopolitical tensions involving Israel and Yemeni Houthi rebels, as well as the Russia-Ukraine conflict, persist in providing support for the price of gold as a traditional store of value.
Reportedly in coordination with the US, Israel conducted airstrikes on Yemen’s Hodeidah port following a ballistic missile attack by Houthi rebels on Ben Gurion International Airport on Sunday.
Mehta added:
Therefore, Gold price seems to remain in a constructive space heading into the two-day US Federal Reserve (Fed) policy meeting starting later on Tuesday.
Fed meeting in focus
The key event this week is the Federal Reserve’s upcoming interest rate decision and subsequent remarks from Fed Chair Jerome Powell on Wednesday.
These will provide insight into the US central bank’s future rate path. Since last December, the Fed has maintained its policy rate within the 4.25% to 4.50% band.
Commenting on the upcoming Fed event, Nick Timiraos, the Wall Street Journal’s Fed whisperer, noted that the Fed “prepares for difficult judgments and emerging divisions regarding when to cut interest rates,” according to FXStreet’s report.
Despite reduced expectations for a June interest rate cut due to a stronger economy, gold optimists remained unfazed, according to Mehta.
Their focus remained on trade news and geopolitical tensions, as well as the rate decision and Powell’s subsequent remarks.
Technical outlook
Technically, the gold price’s significant intraday upward movement has pushed it above the $3,350 resistance.
This level also aligns with the 50% Fibonacci retracement of its recent decline from the record high, according to Haresh Menghani, editor at FXStreet.
“This, along with positive oscillators on the daily chart, suggests that the path of least resistance for the commodity remains to the upside.”
Sustained buying interest exceeding the 61.8% Fibonacci level, approximately at $3,385, would strengthen the positive outlook.
This could propel gold past the $3,400 threshold and towards the subsequent resistance area near $3,425, Menghani said.
The subsequent move up should allow bulls to make a fresh attempt to conquer the $3,500 psychological mark.
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