- Gold surged past $3,400, buoyed by a weaker U.S. dollar and rising geopolitical risks.
- Investors await the Federal Reserve’s interest rate decision and updated dot plot on Wednesday.
- Technical indicators show growing bullish momentum in the near term.
Gold Rallies on Safe-Haven Flows and Dollar Weakness
Gold (XAU/USD) rallied sharply, reaching its highest level since early May, climbing above $3,400. The move was fueled by a combination of softening in the U.S. dollar and renewed geopolitical tensions. The Federal Reserve’s upcoming policy decision and continued developments in the Israel-Iran conflict are likely to remain key drivers for gold’s price action.
Momentum Builds After a Slow Start to the Week
Gold saw little movement to start the week, ending both Monday and Tuesday virtually flat. Optimism around U.S.-China trade negotiations initially limited safe-haven demand. Talks held in London between U.S. and Chinese officials led to an easing of export restrictions, including on rare earth materials, following President Trump’s directive to reduce controls. The outcome helped maintain a fragile truce in ongoing trade relations.
However, sentiment shifted midweek. On Wednesday, the U.S. dollar came under pressure after inflation data from the Bureau of Labor Statistics showed annual CPI rose to 2.4% in May, slightly below the expected 2.5%. Monthly increases in both headline and core CPI came in at just 0.1%, signaling softer inflation and weighing on the dollar.
Gold gained nearly 1% that day and carried the momentum into Thursday, aided by underwhelming producer price inflation data and higher-than-expected weekly jobless claims—both of which further weakened the dollar.
On Friday, gold’s rally accelerated after Israeli Prime Minister Benjamin Netanyahu announced the start of “Operation Rising Lion,” targeting Iranian military and nuclear infrastructure. Iran responded with threats of severe retaliation against both Israel and the U.S., prompting a surge in safe-haven demand and pushing gold decisively above the $3,400 mark.
Fed Policy Outlook and Geopolitics in Focus
With no major economic releases scheduled early in the week, attention will remain on geopolitical headlines, especially in the Middle East. Any further escalation is likely to bolster gold as a safe-haven asset.
The highlight of the week, however, will be Wednesday’s Federal Reserve meeting. While no change to the current 4.25%–4.5% policy rate is expected, markets will scrutinize the revised Summary of Economic Projections, particularly the “dot plot.”
If the dot plot maintains expectations for two 25-basis-point rate cuts in 2025, the dollar could face renewed selling pressure, giving gold additional upward momentum. Conversely, if the Fed revises its projections to just one cut, the dollar might strengthen, potentially triggering a pullback in XAU/USD.
Remarks from Fed Chair Jerome Powell will also be critical. A dovish tone—especially if he acknowledges the recent slowdown in inflation—could undermine the dollar. However, any reiteration of a cautious stance on rate cuts, especially in light of continued labor market resilience, may support the greenback.
Markets in the U.S. will be closed Thursday in observance of Juneteenth, potentially limiting trading activity and liquidity.
Technical Outlook: Bulls in Control
Gold’s daily chart shows the Relative Strength Index (RSI) climbing above 60, alongside a breakout from a symmetrical triangle pattern—both signs of strengthening bullish momentum.
Immediate resistance lies around $3,450, the midpoint of a six-month ascending regression channel. A decisive move above this level would set the stage for a test of the all-time high at $3,500, with $3,580 (the channel’s upper boundary) seen as the next major target.
Support on the downside is layered at $3,330–$3,320 (20-day SMA and lower channel edge), followed by $3,285 (50-day SMA and 23.6% Fibonacci retracement), and $3,200, a psychologically significant round number and horizontal support zone.