Gold prices fell sharply on Monday, dropping more than 2% and trading at $4,521 after reaching a daily high of $4,639, as escalating tensions in the Middle East drove investors toward the US Dollar and pushed US Treasury yields higher [1]. The decline in gold was attributed to increased risk aversion following the end of the ceasefire between the US and Iran. The US Navy launched Operation Freedom to escort commercial vessels through the Strait of Hormuz, while Iran retaliated with attacks against the UAE and attempted to halt shipping through the strait. US President Donald Trump stated, 'we’ve shut down seven small boats,' aiming to disrupt vessel movement, and reports indicated that the US and Israel could resume attacks on Iran within the next 24 hours [1].
The market reaction was pronounced: US equities declined, oil prices surged, and the US Dollar Index (DXY) rose over 0.25%, rebounding from a daily low of 97.97 to 98.46 [1]. The US 10-year Treasury note yield increased by six basis points to 4.432%, creating a headwind for gold, which does not yield interest [1].
On the monetary policy front, New York Fed President John Williams commented that policy is 'well positioned' to address uncertainty from external shocks like the Middle East conflict, but emphasized that the future remains uncertain and the Fed is not in a position to provide strong guidance on interest rates for upcoming meetings [1]. Market expectations for the Federal Reserve to keep rates unchanged at the June 17 meeting stand at 96%, with Kevin Warsh as the newly appointed Fed Chair, according to Prime Terminal [1].
In economic data, US Factory Orders rose by 1.5% month-over-month in March, exceeding the expected 0.5% increase and up from 0.3% in February [1]. Looking ahead, the market is focused on the upcoming ISM Services PMI and US Nonfarm Payrolls data [1].
Technically, gold remains in a sideways pattern, with buyers struggling to break above $4,600. Key resistance and support levels are identified at the 100-day SMA ($4,764) and 200-day SMA ($4,287), respectively. The Relative Strength Index (RSI) is trending lower, indicating growing selling momentum. If gold falls below $4,500, the next support is the March 26 daily low of $4,351 [1].
CONCLUSION
Gold experienced a significant decline as geopolitical tensions in the Middle East fueled demand for the US Dollar and lifted Treasury yields. With the Federal Reserve expected to hold rates steady and technical indicators pointing to further downside, market sentiment for gold remains bearish in the near term.