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Gold prices climbed to a two-week high on Monday as investors reacted to signals of de-escalation in the Middle East and a weaker U.S. dollar. The benchmark gold futures contract rose 1.8% to $2,345 per troy ounce, driven by reduced geopolitical tensions following diplomatic efforts between regional powers. Simultaneously, the dollar index fell to 102.3, pressured by expectations of delayed Fed rate cuts and mixed economic data from the U.S.
The move highlights the inverse relationship between gold and the dollar, with weaker greenback demand pushing investors toward safe-haven assets. Traders are also factoring in the potential for increased central bank purchases of gold in emerging markets, particularly in the Gulf region where demand remains robust. The Middle East de-escalation narrative has added a layer of stability, reducing the appeal of risk-off assets like government bonds.
Looking ahead, market participants will closely monitor the Fed's policy stance and any new developments in Middle Eastern diplomacy. Technical indicators suggest gold could test $2,375 if the dollar continues its downward trend. Gulf investors should watch for potential volatility if geopolitical tensions resurface or if the Fed signals tighter-than-expected monetary policy.
