Gold Price Movement

Gold prices stayed below $3,340 during the European trading session on Monday. The price dipped to about $3,333 while US markets were closed for Memorial Day. This decrease followed President Trump’s announcement that tariffs on the EU would be delayed until July 9. Although the news briefly lowered demand for safe-haven assets, worries remain about the US government’s financial situation. Citigroup raised its three-month gold price forecast to $3,500 per ounce, citing concerns about tariffs and global economic challenges. The US Dollar weakened further, reflecting ongoing fiscal anxieties in the market. Speculators reduced their positions, bringing their US Dollar exposure down from $16.5 billion to $12.4 billion. Trump’s tariff delay provided temporary relief for riskier assets. Gold support is seen at $3,307 and $3,258, with a chance to rebound to higher levels if it breaks through resistance at $3,386 and $3,415. Interest rates influence gold by affecting opportunity costs and the strength of the US Dollar. When rates rise, gold prices usually fall as the Dollar gains strength. The Fed Funds rate is a crucial economic indicator that affects financial markets.

Gold Market Sentiment

On Monday, gold remained just under $3,340 in European trading, eventually dropping slightly to around $3,333. US markets were closed for Memorial Day, leading to less trading activity. Much of the uncertainty came from Trump’s announcement delaying EU tariffs until early July. This news briefly cooled demand for gold but did not ease overall concerns about the US fiscal situation, which still impacts currency sentiment. Citigroup has revised its three-month gold price forecast upward to $3,500 per ounce. This adjustment reflects ongoing global risks and trade concerns. The currency markets seem cautious, and this is evident in recent trading positions. Hedge funds and large speculators are reducing their net long US dollar holdings, dropping from $16.5 billion to $12.4 billion, indicating a change in outlook or a desire to lessen exposure. As for the market’s overall response, equities and riskier assets experienced mild relief due to the trade news. Investors shifted their focus toward riskier investments after the tariff delay. Although this provided some support, it was not enough for gold to break through resistance levels at $3,386 and $3,415. We will monitor these levels closely; a significant break above them could lead gold towards the mid-$3,400s. On the downside, gold has support levels around $3,307 and more firmly at $3,258. If prices reach these levels again, traders short on gold may want to take profits, while those looking to buy could find good entry points. Price movements around these areas often present chances for well-timed trades—if market liquidity allows. Interest rates remain a crucial factor here. They directly affect the opportunity cost of holding gold—when rates rise, gold typically underperforms since it doesn’t yield interest. Interest rate differences also influence currency flows, which is important because gold is priced in US Dollars. The strength or weakness of the Dollar can significantly impact gold prices, and its recent softness has been supportive for gold, even amid daily price fluctuations. We are particularly attentive to the Fed Funds rate. This benchmark not only indicates the direction of monetary policy but also affects returns across asset classes. When the Federal Reserve tightens conditions, it usually strengthens the US Dollar. Conversely, easing or expectations of easing can help gold rise. During this quieter week, even small shifts in rate expectations could influence market sentiment more than usual. As we look ahead, navigating positions around rate expectations and geopolitical developments will require precise timing. The coming days may seem relatively calm, but that should not be mistaken for stability—changes can happen quickly, and the premiums in many volatility structures remain sensitive. We’re closely watching implied volatility across gold and US Dollar pairs. Spread dynamics are showing some tension, affecting delta risk and gamma hedging strategies. Any sharp market movement, particularly resulting from fiscal news or unexpected economic data, will likely test the readiness of those holding short volatility or aggressive carry positions. Stay alert. Create your live VT Markets account and start trading now.

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