Gold (XAU/USD) rose more than 1% on Monday (05/05) as traders turned to safe assets after an eventful weekend in the geopolitical sphere. Houthi attacks on Ben Gurion airport this weekend and Israel's pledge to fulfill its promises while preparing for a broad ground offensive in Gaza have again raised risks in the region. Meanwhile, US President Donald Trump said that military action could be an option for the US to take control of Greenland.
Gold's appeal increased as traders prepared for the Federal Reserve's interest rate decision on May 7. Over the weekend, Trump again expressed his dislike of the Fed and its Chairman Jerome Powell. After calling Powell "tough", the US President asked members of the Federal Open Market Committee (FOMC) to pressure Chairman Powell to deliver a rate cut.
According to the Chicago Mercantile Exchange's (CME) Fedwatch tool, no rate cut is expected on Wednesday. Given the latest Nonfarm Payrolls data and a slew of recent data from sectors like Manufacturing and Services, the US economy is starting to ease, but not fall. This could provide ammunition for Fed Chair Powell to fight political pressure and convey to the market that interest rates will remain steady for a while longer until the Fed feels comfortable enough to cut them.
Source: FXStreet
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