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Geopolitics, FOMC Policy Dominate Gold Market Sentiment

  • 3 mins read ●
  • Published:
gold market analysis 3

Key Points

  • Gold (XAU/USD) is up more than 13% in 2024 amid significant uncertainty.
  • The Israel/Iran situation and shifting FOMC policy are the primary market drivers. 
  • Until Friday’s PCE Index release, this week features a modest economic calendar.
  • XAU/USD pullback buys from the 2325.00 area offer traders a way of joining the bullish trend.

Uncertainty Boosts Gold In 2024

The gold market has been extremely active throughout 2024. Why? Geopolitical uncertainty and shifting monetary policy have driven short-term traders and long-term investors into bullion. The result has been an epic Q1 rally of more than 13%, with prices driving toward $2,500 per ounce.

As a general rule, markets aren’t fond of uncertainty. Stocks, currencies, and many commodities react in a negative fashion when future outlooks become murky. This concept doesn’t hold true for gold. When uncertainty arises, bullion typically rallies. That’s exactly what has happened in 2024 — Middle East conflict and FOMC policy have repeatedly driven gold to new all-time highs. 

Market Drivers

Tensions between Iran and Israel have reached a peak over the past several weeks. The latest event came on Friday, 19 April, with a retaliatory airstrike by Israel on Iranian soil. The end product was damage to an airbase in Isfahan and a massive short-term spike in the price of gold. Without question, Middle East escalation remains the number one bullish catalyst in the current gold market dynamic.

The second key gold market driver is the Fed’s monetary policy. For quite some time, the markets have been pricing a series of rate cuts in 2024. At press time, the CME FedWatch Index favors the first cut in several years taking place this September.

As a general rule, commodities rise during periods of inflation and USD devaluation. The promise of lower interest rates has certainly contributed to 2024’s bullish bullion market, but these expectations are changing. Persistent inflation may delay the anticipated rate cuts. Thus far in April, the USD has posted solid gains, placing a temporary “ceiling” on gold prices. These shifting FOMC expectations have brought gold bears into the market to open the trading week.

Pullback Buy On The Horizon

During the Friday 19 April London session, spot gold exploded to a test of  2417.00 on heavy buying. Since that furious rally, bullion is off nearly 3.5%. Now, pullback buys from the weekly 38% Fibonacci retracement are in play.

gold daily chart
Gold Daily Chart

Until Friday’s close, bidding the XAU/USD from the 2325.00 area isn’t a bad way to play the action. This area will likely attract traders interested in going long gold to join the bullish trend. On 15 April, bidders defended the 2325 zone with conviction; it’s not out of the realm of possibility that we see a replay of this price action later this week.

This Week’s Key Events

Compared to next week’s Fed Announcements, this week’s economic calendar is the proverbial “calm before the storm.” Wednesday features US Durable Goods Orders, Thursday is headlined by US GDP, while Friday brings the latest PCE Price Index release. These three events have the potential to shake up the gold market, at least in the short term.

If you’re in the markets this week, be sure to stay up-to-date on the Israel/Iran situation. Although the markets are pricing in de-escalation, anything can happen. The situation remains fluid and is the number one driver of gold market values.

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Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.

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