Gold prices are once again the focus of global markets as geopolitical tensions in the Middle East escalate, amid expectations that the US Federal Reserve (Fed) may be close to cutting interest rates in the near future.
The precious metal surged to a new weekly high near US$3,380 an ounce, supported by investor demand as it becomes more cautious about global risks and weaker-than-expected US inflation data.
Geopolitical Tensions Boost Demand for Safe-haven Assets
The growing uncertainty in the Middle East has been a major catalyst for investors’ increased interest in safe-haven assets such as gold. Tensions between Israel and Iran have heated up again, with reports that Israel is preparing military action and Iran is expected to retaliate.
US intelligence has also warned that US strategic assets in Iraq could be targeted. At the same time, diplomatic efforts are ongoing, including new nuclear talks in Tehran, which are expected to be attended by President Trump’s special representative this weekend.
All of this makes gold increasingly attractive as a safe haven when international crises could erupt at any time.
Weak US Inflation Data Supports Rate Cut Expectations
US consumer inflation (CPI) data for May recorded a disappointing reading of only 0.1% month-on-month and 2.4% year-on-year. The core reading (excluding food and energy) was also weaker than expected.
The situation continues to fuel hopes that the Fed will start easing monetary policy. Now, the market expects a 62% chance that the Fed will cut interest rates by 25 basis points in September, up from 52% before the data was released.
The combination of slowing price pressures and global trade uncertainty provides strong grounds for the Fed to take a cautious approach to its monetary policy.
US Dollar Falls
Forex markets also reacted as the US dollar fell to a two-month low on weak inflation data and confusion over the deadline for new tariffs on China.
While President Trump has hinted that the July 8 deadline may be extended, structural tensions remain. China reportedly shortened the duration of rare earth export licenses for US-based buyers, suggesting that tactical pressure is still on even as diplomatic talks continue.
With the dollar weakening, gold has become more attractive as a non-yielding asset.
Technical & Institutional Analysis Strengthens Gold’s Resilience
Technically, the gold price structure appears to be still strong. The key support level at $3,297 has been successfully defended, and the price is now testing the resistance level around $3,377. If this level is successfully broken, the next direction is $3,400 and the May high of $3,439.
Downside risks are seen as limited as long as the price remains above $3,297, with secondary price “support” around $3,279 and $3,232.
Institutional demand for gold is also still high. The latest report by the European Central Bank yesterday showed that the value of gold reserves now outperforms almost all other assets except the US dollar, confirming the strategic role of gold in central bank portfolios, especially in an atmosphere of uncertainty over US economic leadership and unbalanced inflation risks.
Gold Market Focus
US Producer Price Index (PPI) data due out tonight will be crucial to determine whether disinflationary pressures are truly sustained or temporary.
Central bank sentiment, particularly the Fed and ECB, will continue to influence markets, particularly how they balance external shocks and domestic price pressures.
Instability in West Asia remains a major risk to global asset valuations and market liquidity.
In conclusion, gold is no longer just a yellow metal, but is once again a savior in a volatile global environment. Whether you are a retail, institutional or intraday trader, a strategy based on accurate and timely information is key to staying ahead of the market.
