Gold (XAU/USD) gathered strength on Monday, supported by a softer US dollar (USD) and escalating geopolitical tensions in the Middle East.

The price of gold could see long-term gains due to increasing demand from central banks. However, the possibility of reduced interest rate cuts by the Federal Reserve (Fed) and hawkish comments from Fed officials may create selling pressure, as higher interest rates diminish gold’s appeal as a store of value.

Geopolitical Tensions and Central Bank Demand

Geopolitical tensions in the Middle East have intensified, with recent Israeli air attacks in Gaza resulting in significant casualties. This situation typically drives demand for safe-haven assets like gold.

Furthermore, the consistent demand for gold from central banks globally is likely to support gold prices in the long term.

Upcoming Economic Events and Fed’s Influence

The US banks will be closed on Monday for Memorial Day, but gold traders will be closely watching Fed speeches on Tuesday, including those by Michelle Bowman, Loretta Mester, and Neel Kashkari.

Additionally, the preliminary reading of US Gross Domestic Product (GDP) for Q1, due on Thursday, is expected to show a 1.5% growth. Stronger-than-expected GDP data could boost the USD, negatively impacting USD-denominated gold prices.

Market Sentiment and Price Movements

• Recent Price Performance: Gold has increased by over 16% year-to-date, hitting a record high of over $2,400 per ounce in May.
• US Durable Goods Orders: April’s durable goods orders rose by 0.7% MoM, exceeding expectations and potentially supporting the USD.
• Consumer Sentiment: The University of Michigan Consumer Sentiment Index increased to 69.1 in May from 67.4 in April, with inflation expectations for one year rising slightly.

Analyst Predictions and Market Trends

• UBS Forecast: UBS analysts have raised their gold price forecast to $2,600 by the end of 2024.
• Citi Prediction: Citi analysts predict gold could reach $3,000 per ounce within the next six to eighteen months.
• Gold Imports to India: High gold prices are likely to reduce gold imports to India by nearly 20% this year, as consumers exchange old jewelry for new items.

Gold Price Forecast: Technical Outlook

Gold (XAU/USD) continues to show strength, currently trading at $2,334.45, up 0.36% so far. The green line marks the pivot point at $2,334.45, a critical level to watch for potential market direction. Immediate resistance levels are at $2,325.18, $2,351.01, and $2,366.51.

On the downside, support levels are at $2,307.40, $2,292.70, and $2,277.62. The Relative Strength Index (RSI) stands at 37, indicating potential for a rebound from oversold conditions. The 50-day Exponential Moving Average (EMA) is at $2,369.86, suggesting strong resistance around this level.