Gold Rockets on Heightened Geopolitical Uncertainty
The gold ( XAU/USD ) price rose by 1.86% on Tuesday, supported by rising geopolitical risks and a weakening US dollar (USD).
Market anxiety intensified following reports that Israel may be preparing to strike Iranian nuclear sites, a move that could significantly escalate tensions in the Middle East. Adding to global unease, US President Donald Trump announced that Russia and Ukraine would begin ceasefire negotiations but appeared to distance himself from mediating the conflict directly. New sanctions imposed by the EU and U.K. against Russia also added to the already tense geopolitical environment, driving increased demand for safe-haven assets like gold.
At the same time, the US dollar remained under pressure, weighed down by the Federal Reserve’s (Fed) cautious outlook and Moody’s recent downgrade of the US credit rating. Investor sentiment has been rattled by uncertainty surrounding future tariff policies and an upcoming key vote on President Trump’s sweeping tax reforms. The weakness in the US dollar has made gold more attractive to foreign buyers, as the metal becomes cheaper in other currencies. This combination of geopolitical uncertainty and macroeconomic headwinds reinforces gold’s appeal as a protective asset in turbulent times.
XAU/USD continued rising during Asian and early European trading sessions. Today, investors should closely monitor the ongoing G7 finance ministers’ meeting in Canada, wary that US officials may signal a preference for a weaker US dollar. Key levels to watch for XAU/USD are the support level at $3,260 and the resistance level at $3,340.
Euro Rises as Traders Await Trump’s Next Moves and Trade Talks
The euro ( EUR/USD ) gained 0.39% against the US dollar (USD) on Tuesday. EUR/USD has been rising for two consecutive days as US President Donald Trump failed to convince Republican supporters to back his sweeping tax bill.
"Tariff rates are now lower, but not low, and the same can be said about recession risks in the US", Goldman Sachs analysts wrote in a research note. "But as recession risks have compressed, risks from higher rates are growing", they added. "The US still faces the worst growth-inflation mix of the major economies, and as the fiscal bill makes its way through Congress, eroding US exceptionalism is proving—literally—costly at a time of large funding needs. This leaves wider paths to a weaker dollar and a steeper US Treasury curve".
Unease continues to exert pressure on the US dollar, even as Treasury yields rise, reflecting a persistent ’sell America’ tone among investors, albeit with less urgency than earlier in the month. While Moody’s recent downgrade of US sovereign credit had a muted market reaction, it still contributes to a broader narrative of waning confidence in US assets as safe-haven. Investors are reassessing their exposure to dollar-denominated holdings amid mounting fiscal uncertainty and geopolitical tensions.
EUR/USD continued to rise during Asian and early European trading sessions. Today, traders should closely watch the ongoing G7 finance ministers’ meeting in Canada. If US officials signal a preference for a weaker US dollar, it would have broad implications for global capital flows and trade competitiveness. Key levels to watch are support at 1.13000 and resistance at 1.14000.
The British Pound Holds Near Three-Week High
The British pound ( GBP/USD ) rose by 0.22% against the US dollar (USD) on Tuesday. This currency strengthened after the U.K. and EU agreed on a significant reset of trade and defence relations, which markets have interpreted as a potential catalyst for improved economic cooperation and long-term growth prospects.
"Yesterday’s big news in terms of the new U.K.–EU deal was a mild positive for sterling, although we don’t think it moves the needle substantially on growth given the relatively small size of the animal livestock and border crossing arrangements that have been made", said Chris Turner, Head of FX Strategy at ING. "In the G10 space, interest rates are quite supportive for the U.K. because Bank of England policy is more aligned with Federal Reserve policy than it is with European Central Bank policy, so that’s helping sterling".
Adding to the pound’s support, Bank of England (BoE) Chief Economist Huw Pill struck a hawkish tone, suggesting that the central bank’s recent pace of rate cuts may have been overly aggressive. Pill emphasised persistent wage-driven inflationary pressures and clarified that his vote to hold rates in May should be viewed as a temporary pause rather than a policy shift.
GBP/USD rose during the Asian and early European trading sessions. Traders should closely watch the upcoming Inflation Rate data today at 6:00 a.m. UTC, which could influence the BoE’s next interest rate decision in June. Key technical levels to monitor include resistance at 1.34500 and support at 1.33000.