Gold (XAU/USD) climbed to its highest level since late January during Monday’s early European trading, with buyers now attempting to extend gains beyond the $5,400 zone amid a broad flight to safety.
Over the weekend, geopolitical tensions in West Asia escalated sharply, unsettling global markets. Reports of coordinated military action involving the United States and Israel against Iran intensified fears of a wider regional conflict. At the same time, Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy announced the closure of the vital Strait of Hormuz, raising concerns about a prolonged Middle East confrontation. These developments strengthened demand for traditional safe-haven assets, lifting gold prices at the start of the week.
On the macroeconomic front, Friday’s US Producer Price Index (PPI) data renewed worries about persistent inflation. Slowing economic activity has created a policy dilemma for the Federal Reserve: cutting interest rates could reignite inflation, while keeping rates elevated risks further economic slowdown. This backdrop continues to support non-yielding assets such as gold, although a sharp intraday rebound in the US Dollar — its strongest since January 23 — may limit additional upside.
Market participants are also watching key US economic data this week. The schedule begins with the ISM Manufacturing PMI, followed by the ADP private-sector employment report and ISM Services PMI on Wednesday, and culminates with the closely monitored Nonfarm Payrolls (NFP) report on Friday. Even so, geopolitical developments are likely to remain the primary driver of risk sentiment and gold demand.
Technical outlook
After last week’s breakout above the $5,200 resistance zone, Monday’s advance continues to favor bullish momentum in XAU/USD. The Moving Average Convergence Divergence (MACD) indicator remains in positive territory with the signal line crossed to the upside, suggesting strengthening buying pressure.
The Relative Strength Index (RSI) sits near 69, just below overbought levels, indicating firm but still sustainable upward momentum. Initial support is seen around $5,260, followed by stronger support near $5,210. A break below $5,210 could expose the $5,180 level.
On the upside, immediate resistance lies near $5,390. A sustained move above this level would confirm continuation of the uptrend, while failure to clear it could trigger a corrective pullback toward the noted support zones.
