The gold price has fallen in European trading, approaching the $3,320 mark as risk appetite in financial markets increased. Optimism about the prospects for a ceasefire and a lasting solution to the ongoing conflict between Israel, Iran, and the USA – and thus a reduction in the risk of further escalation – led to broad-based gains in stock markets and weighed on safe-haven assets such as gold, which is now facing lower demand.
Against this backdrop, a further downtrend for the precious metal is possible if optimism persists, with the $3,300 mark emerging as the next key support level. However, the downtrend is likely to be limited by ongoing concerns about the potential stagflationary effects of tariffs on the global economy, ongoing precious metal purchases by central banks, geopolitical turmoil in Eastern Europe, and the expectation that the Federal Reserve could soon start cutting interest rates.
Will Fed Chair Powell’s Statements Strengthen Gold?
Traders will closely follow Jerome Powell’s statement to the US Congress throughout the day, looking for clues about the Fed’s interest rate path. Should the chairman express a more cautious stance, a rate cut in July would become more likely – which could further weaken the US dollar and support the gold price due to the inverse correlation between the two assets.
Ricardo Evangelista – Senior Analyst, ActivTrades
