Gold prices (XAU/USD) stabilized around $2,620 on Tuesday following a sharp drop of over $90 on Monday. The decline came as rumors circulated that Israel and Hezbollah might agree to a ceasefire deal in Lebanon. While positive for geopolitical stability, the news reduced safe-haven demand for gold.
Impact of Ceasefire Rumors on Gold Prices
Gold’s decline on Monday was driven by optimism surrounding a potential ceasefire between Israel and Hezbollah. Reports suggested that both parties were nearing an agreement that could ease tensions in Lebanon. Although the deal is yet to be finalized, it has already influenced market sentiment.
According to the BBC, the Israeli security cabinet is set to discuss a 60-day ceasefire plan. The proposal includes withdrawing Israeli forces from Lebanon in exchange for Hezbollah retreating from border zones. However, this agreement does not address the ongoing conflict in Gaza. Despite ceasefire discussions, violence persists, with Israeli forces conducting strikes in Lebanon, Gaza, and along the Syrian border.
Gold Reacts to Trump’s Trade Tariff Threats
On Tuesday, gold showed slight weakness before recovering. This fluctuation was linked to comments by former President Donald Trump, who threatened new trade tariffs. Trump proposed 25% tariffs on Mexico and Canada and an additional 10% on China’s goods, unless these nations take action against illegal immigration and drug smuggling into the United States.
The strong US Dollar (USD), bolstered by Trump’s statements, negatively impacted gold prices since gold is priced in dollars. However, the precious metal managed to regain its footing by the end of the trading session.
Technical Analysis – Gold Near Critical Levels
Gold’s sharp drop on Monday saw it break below the 50-day Simple Moving Average (SMA) of $2,666. The precious metal then tested a major trendline around $2,630, marking a critical support level.
Monday’s price action formed a Bearish Engulfing candlestick, a pattern often signaling further downside. If Tuesday’s session confirms the pattern with another bearish candle, it could indicate a short-term reversal. However, the broader trend for gold remains bullish in the medium and long term.
Key Levels to Watch:
- A move above $2,721 (Monday’s high) would signal bullish momentum and pave the way to test $2,790, the previous record high.
- A clear break beneath the trendline might turn the short-term outlook bearish, potentially causing additional declines.
Outlook for Gold Prices Amid Geopolitical and Economic Events
Gold prices remain sensitive to geopolitical developments and economic policy changes. Traders will continue to monitor the situation in Lebanon and Trump’s trade policies for potential impacts on gold demand.
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