Gold extends rally near $2,360 amid geopolitical risks

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The price of gold (XAUUSD) extended its upside near $2,360 on Monday during early Asian trading, as the rising geopolitical tensions in the Middle East boost safe-haven flows and benefit precious metals.

Later this week, the US Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales will be in the spotlight and might offer some hints about the economic outlook and inflation trajectory.

Several Federal Reserve officials delivered hawkish messages last week: Atlanta Fed President Raphael Bostic said she didn’t expect it would be appropriate for the Fed to cut interest rates in 2024, citing elevated inflation in the first several months of the year; and, Minneapolis Fed Neel Kashkari noted that he is in “wait and see mode” about future monetary policy.

US consumer sentiment fell sharply in May to the lowest level in six months amid stubbornly high inflation. The preliminary University of Michigan’s Consumer Sentiment Index declined to 67.4 in May from a final reading of 77.2 in April, below the market consensus of 76.0.

The final reading of US CPI inflation for April is expected to ease to 3.4% YoY in April from the previous reading of 3.5%. The hotter-than-expected data might dampen hope for US rate cuts and drag gold lower.

On the other hand, the Israeli military said that it launched operations in northern Gaza overnight and that “precise operations” are ongoing in eastern Rafah and near the Rafah border, as well as in the Zeitoun neighbourhood in central Gaza.

The military engagement in Rafah occurs before a full-scale invasion, according to CNN. The ongoing geopolitical tension in the Middle East might lift the price of precious metals, a traditional safe-haven asset.

(Source: OANDA)