Gold prices continue to hold key support levels amid a highly volatile environment, despite facing selling pressure for the third consecutive day. This comes in the wake of a relative improvement in geopolitical conditions following the announcement of a ceasefire in regional conflicts, which has directly influenced investor sentiment in precious metals markets.
At the same time, the sharp decline in oil prices has contributed to increased selling pressure on gold, as the weakness in “black gold” has reduced the appeal of the metal as a hedge against inflation. However, gold managed to attract buyers at lower levels, benefiting from the decreased demand for the U.S. dollar as a safe haven due to the improved geopolitical climate.
On the economic front, expectations of interest rate cuts by the Federal Reserve are playing a pivotal role in supporting gold. Several Fed officials have expressed readiness to lower interest rates in the upcoming July meeting if inflationary pressures continue to ease. This outlook adds pressure on the dollar and boosts the attractiveness of gold, which offers no yield.
Market indicators show that the probability of a Fed rate cut next month has risen to 21%, up from 14.5% a week ago. Investor focus now shifts to the upcoming two-day testimony of the Fed Chair before Congress starting Tuesday, where markets will be looking for new signals regarding the timing of a potential rate cut.
Meanwhile, markets remain cautious about the developments of geopolitical conflicts and the extent of their stability, especially with ongoing reports of sporadic military actions. Should tensions escalate or hostilities resume in the region, this could drive renewed demand for the U.S. dollar, which may once again weigh negatively on gold prices.
Given these dynamics, gold remains caught in a delicate balance between political and economic factors, as investors continue to monitor for any new developments that could reshape market trends.
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