Gold Prices Soar Ahead of Fed Decision Amid Economic Uncertainty

Gold prices staged a powerful rally on Monday, surging nearly 3% as traders shifted to safe-haven assets ahead of the Federal Reserve’s highly anticipated interest rate decision.

The yellow metal jumped 2.89%, gaining $94.20 to settle at $3,341.30 per troy ounce for the June futures contract. After dipping to an intraday low of $3,243.50, gold rebounded strongly to close near the session high of $3,346.70 — fully recovering last week’s 2.49% decline and exceeding it.

Despite a relatively light trading volume of 182,130 contracts, Monday’s rally sparked renewed bullish momentum, with analysts eyeing the potential for gold to challenge its strongest weekly performance of 2025. That benchmark was set in early April when prices soared 6.51% ($198.80) on volume exceeding 1.3 million contracts.

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What’s Fueling the Gold Rally?

While a 0.27% drop in the U.S. Dollar Index, down to 99.60, provided a modest boost, the primary catalyst for gold’s rise was mounting market uncertainty. Investors are becoming increasingly cautious amid global economic concerns and geopolitical developments.

A major contributor to the unease: President Donald Trump’s proposal to impose 100% tariffs on foreign-produced films, adding to fears of a renewed global trade war. This risk-off sentiment drove demand for gold, traditionally viewed as a hedge during periods of economic instability and political volatility.

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All Eyes on the Fed’s Rate Decision

Investors are now focused on the Federal Reserve’s interest rate decision, set for Wednesday. According to the CME FedWatch Tool, there’s a 95.6% probability the Fed will hold rates steady in the 4.25% to 4.50% range, with just a 4.4% chance of a rate cut — despite growing political pressure from President Trump.

The Fed faces a delicate balancing act. Trump continues to push for lower interest rates, but his aggressive tariff measures could exacerbate inflation, making the central bank’s job more complicated.

Saxo Bank commented in a recent report:

“Gold trades with support now clearly defined near USD 3,200. After a strong rally in 2025, momentum has eased slightly, with hedge fund net longs falling to a one-year low.”

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Jobs Data Adds to Uncertainty

Last week’s robust Non-Farm Payrolls report reinforced the U.S. economy’s underlying strength, showing continued job creation despite trade-related headwinds. This resilience is likely to influence the Fed’s rate stance, reinforcing expectations for no immediate change.

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Gold Outlook: Will the Rally Sustain?

With gold prices up nearly 25% year-to-date, market sentiment remains cautiously optimistic. Key levels to watch in the short term include:

• Support: $3,200 – a major technical and psychological floor.
• Resistance: $3,346.70 – the recent high, and above that, the record peak near $3,509.

If gold maintains its momentum after the Fed’s decision, the metal could aim for a retest of the 2025 highs. However, a hawkish tone from the central bank could trigger profit-taking and pull gold prices back toward key support.

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