Gold price took a sharp nosedive on Monday, marking its biggest daily loss since June 13, 2022, as fears of a wider conflict in the Middle East eased. The XAU/USD pair plummeted over 2% amid reduced bets for interest rate cuts by the Federal Reserve (Fed), dragging the precious metal to sub-$2,300 levels, a two-week low.
The decline in gold prices, which have now corrected over 5% from their all-time peak earlier this month, is also attributed to speculation that major central banks may cut interest rates this year. Traders are exercising caution and refraining from aggressive bets as they await key US macroeconomic releases this week.
The focus is on the upcoming US Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index, scheduled for later this week. These data points will play a crucial role in shaping expectations regarding the Fed’s future policy decisions and driving demand for the US Dollar (USD), which in turn will impact the price of gold.
Meanwhile, technical analysis suggests that a sustained break below the $2,300 mark could lead to further downside for gold prices, potentially targeting support levels at $2,260-2,255 and $2,225. On the upside, resistance is seen near the $2,325 region, with a move beyond that level potentially pushing prices towards $2,350-2,355 and $2,380.
Overall, the gold market is currently influenced by geopolitical developments, interest rate expectations, and US economic data releases. Traders are closely monitoring these factors to gauge the future direction of gold prices amidst a backdrop of global economic uncertainty.