FX.co ★ XAU/USD, GOLD

Gold prices surged by more than one percent on Monday as a dramatic escalation of geopolitical instability in the Middle East drove investors toward the safety of the yellow metal. At the time of writing, the XAU/USD pair was trading near $5,341 per ounce, having retreated slightly from an intraday peak of $5,419. This bullish momentum is being almost entirely dictated by the widening conflict involving the United States, Israel, and Iran. Following targeted operations over the weekend, the theater of war has expanded significantly; Hezbollah has intensified strikes on Israel, prompting heavy retaliation, while Tehran has responded by launching a barrage of missiles and drones targeting Israel, various Gulf states, and even a British air base in Cyprus. Adding to the markets unease, U.S. President Donald Trump remarked in a CNN interview that military operations were "going very smoothly," suggesting a high-intensity conflict that could last at least another four weeks. This climate of extreme uncertainty, compounded by a total lack of progress in peace negotiations between Russia and Ukraine, has solidified gold’s status as the ultimate hedge against global chaos. The relationship between gold and the U.S. Dollar has taken on a unique character in this environment. Typically, a stronger dollar weighs on gold, but surging oil prices—driven by the threat to supply routes like the Strait of Hormuz—have sparked intense inflationary fears. This has caused both the U.S. Dollar Index (DXY), which climbed 1% to 98.67, and gold to rise in tandem, as both are being sought for their protective qualities. On the domestic front, the Federal Reserve’s anticipated path toward monetary easing is providing further structural support for bullion. While money market participants have slightly dialed back their expectations for total easing in 2026—now pricing in 49 basis points compared to the previously expected 61—the consensus remains firm that at least two rate cuts are on the horizon this year. This "dovish" backdrop traditionally lowers the opportunity cost of holding non-yielding assets like gold, making it more attractive to institutional investors. Analysts at BNP Paribas have noted that physical investment demand is the primary engine for this years rally, with Gold ETFs adding 2 million shares in early 2026, a pace expected to eventually eclipse the traditionally dominant buying power of Chinese retail investors. The most recent economic indicators from the Institute for Supply Management (ISM) further complicate the inflation narrative. While the Manufacturing PMI remained in expansion territory for the second consecutive month at 52.4, the "Prices Paid" sub-index spiked to its highest level in three and a half years. This suggests that new import tariffs are aggressively pushing up input costs, which could lead to "sticky" inflation that keeps gold demand high. From a technical perspective, the XAU/USD uptrend remains remarkably resilient. Although some bulls chose to take profits as the price pulled back from the four-week high above $5,400, the Relative Strength Index (RSI) shows that the market is far from being overbought, leaving plenty of "dry powder" for a renewed push higher. If the pair can decisively break back above $5,350, the immediate resistance levels are pegged at $5,400 and the intraday high of $5,419. Beyond that, the January peak of $5,451 stands in the way of a run toward the psychological all-time high of $5,600. Conversely, if the price slips below $5,300, support is expected to kick in at $5,279 and $5,250. Investors are now turning their attention to upcoming remarks from New York Fed President John Williams and Kansas City Fed President Jeffrey Schmid for clues on how the central bank will balance these geopolitical shocks against rising domestic costs.