Quick overview

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Gold retreats from session highs as traders focus on the Middle East events.  The gold markets benefited from the increase in demand for safe-haven assets. However, some traders decided to take profits off the table after the strong rally.

Rising oil prices have traders worried about sell-offs on global markets. On the other hand, the US indices bounce back from session lows and move back into positive territory. The length of the military campaign against Iran is the main factor influencing gold prices.

The yellow metal has pulled back from four-week highs reached during Monday’s European session past $5,400, but price action indicates that bulls are booking profits.

The bullish trend is still intact. The Relative Strength Index (RSI), is in bullish territory and far from overbought, showing that momentum for gold is still positive

$5,400 would be the first barrier if XAU/USD surpasses $5,300, and $5,420 would be the day’s high.

The next area of interest above would be the January 30 high of $5,451, which is higher than the record high of $5,600. On the other hand, if gold falls below $5,300, the daily high on February 27 would serve as the first support at $5,279, followed by $5,250.

If the operation lasts for a few weeks, the demand for safe-haven assets will increase, supporting gold prices. If the military operation is finished in a few days, traders might rush to take profits after the strong rally. In theory, gold pulled after failing to shatter.

Israel and the United States attacked Iran’s nuclear infrastructure and senior leadership. Combat operations in Iran will continue until America’s goals are achieved, US President Donald Trump declared on Monday.

A traditional safe-haven asset like gold has benefited from a risk-off sentiment in financial markets brought on by fears of a more extensive and protracted conflict in the Middle East.

However, concerns about inflation are reappearing as oil prices rise, causing markets to lower the possibility of a Federal Reserve (Fed) interest rate cut.

This could therefore put pressure on a non-yielding asset. Although US President Donald Trump has advocated for lower rates, markets generally anticipate that the US central bank will keep interest rates unchanged until the summer. Later in the day, traders will watch the Fedspeak.