Gold's Battle: Struggling to Stay Above $2,350

Despite a recovery in Asian markets, led by the rally in Chinese stocks, investors remain in a wait-and-see mode before placing fresh bets on risky assets following late Saturday’s escalation in the Middle East geopolitical tensions.

Iran’s retaliatory drone attacks on Israel on Saturday spooked markets and rekindled the safety appeal of Gold price, as investors stay fearful of whether Iran’s unprecedented strike on Israel could fuel a wider regional conflict.

Gold price is also benefiting from a broadly weaker US Dollar (USD), as the Greenback pays little heed to the cautious market environment. Market participants likely believe that the recent upsurge in the US Dollar is excessive, and hence, they avoid creating fresh positions in the US currency even though US Treasury bond yields look to extend Friday’s positive momentum.

US Treasury bond yields keep up recent gains due to the pushback in expectations of the US Federal Reserve’s (Fed) interest cut from June to September, courtesy of elevated inflation level and a resilient US economy. The further upside in the Gold price, therefore, appears elusive on firmer US Treasury bond yields.

However, if risk sentiment sees a dramatic positive shift, it could trigger a fresh selling wave in Gold price. Traders are taking account of the UK, France and Egypt condemning Iran's action while Saudi Arabia has called for restraint, calming markets somewhat so far this Monday. The S&P 500 futures are up 0.25% on the day, reflecting the renewed market optimism.

All eyes now remain on the geopolitical developments in the Middle East for fresh trading impetus in Gold price. If the Middle East turmoil worsens, Gold price could see an extension of the rebound toward $2,400. But a resurgent demand for the US Dollar on increased safe-haven flows and hawkish US Federal Reserve (Fed) expectations could act as a headwind to the Gold price upswing.

The top-tier US Retail Sales data due later on Monday could also have a significant impact on the value of the US Dollar and, in turn, on the USD-denominated Gold price.

with the monthly headline figure to increase by 0.3% in March, slower than February’s 0.6% rise.