Market Analysis

Gold prices (XAU/USD) regained positive momentum on Tuesday, halting a two-day corrective decline from last week’s all-time high. The potential for escalating geopolitical tensions in the Middle East is a significant factor driving demand for this safe-haven asset. Additionally, expectations of a continued slowdown in US inflation are fueling predictions that the Federal Reserve (Fed) will further cut interest rates, coupled with hopes that China's stimulus measures will boost physical demand for gold.

However, Fed Chair Jerome Powell's relatively hawkish remarks on Monday led investors to temper their expectations for aggressive policy easing. This development supported the US Dollar (USD), which saw increased buying for the second consecutive day, bouncing back from its lowest levels since July 2023. Moreover, the positive sentiment in global financial markets may limit gold prices ahead of crucial US economic data releases set for this week, starting with the ISM Manufacturing PMI later today.

Technical Outlook: The gold price outlook remains bullish, with support around $2,625-$2,624 proving critical.

From a technical standpoint, buying activity near the $2,625-$2,624 level reaffirms a support area formed by a short-term ascending trend-channel resistance break. This zone is likely to act as a pivotal point. If selling pressure continues, gold could decline towards the $2,600 mark; a decisive break below this level may lead to significant downward movement, potentially targeting the $2,560 intermediate support before reaching the $2,535-$2,530 area.

Conversely, resistance is expected at the $2,656-$2,657 horizontal zone, followed by the $2,672 area and the $2,685-$2,686 region, which represents the record peak achieved last week. If the price surpasses the $2,700 mark, it will be seen as a new bullish signal, further extending the multi-month uptrend.

Paraphrasing text from "FX Street" all rights reserved by the original author.