Spot gold rose 2% on Monday, marking the biggest single-day gain in weeks. Ole Hansen, head of commodity strategy at Saxo Bank, attributed the rally to the dollar’s pullback, which acted as the “necessary trigger” for hesitant buyers to return to the market.
In addition, the prospect of a rate cut by the Federal Reserve in December provides support. Fed funds futures show a 58.9% chance of a 25 basis point rate cut, up from 41.1% last week, making gold more attractive as a non-yielding asset.
Can geopolitical tensions create more momentum?
Gold’s appeal as a safe haven has also been strengthened by escalating geopolitical risks. Last weekend, Russia launched its biggest airstrike on Ukraine in three months, adding to market concerns. Historically, gold has been a favored hedge during periods of geopolitical instability, especially when combined with falling interest rates.
Will Gold Face Resistance at Key Levels?
While the recovery is promising, gold faces strong resistance at $2663.51-$2693.40 and the 50-day moving average at $2656.59. These levels represent critical barriers, with the potential to attract sellers and limit profits in the short term.
However, if prices break through these levels, the rally could extend to the $2700-$2750 range. The short-term outlook is cautiously bullish, although traders should prepare for possible reversals if the dollar strengthens or yields rise again. The Federal Reserve’s upcoming commentary will be critical in shaping the market’s next steps.