• Gold rallies as escalation of the US-Iran war heightens geopolitical risk.
• DXY climbs near 98.70, yet haven flows and oil-driven inflation fears underpin bullion.
• Markets still price an easing by the Federal Reserve despite reduced dovish bets.

Gold prices advance over 1% on Monday, as geopolitical risks rise due to the escalation of the conflict in the Middle East that sparked an attack from the US and Israel on Iran. At the time of writing, XAU/USD trades at $5,341 after hitting a one-month high of $5,419 earlier in the day.

Geopolitics drive XAU’s price action

The attack that began targeting the elimination of Iran’s Ayatollah Ali Khamenei has broadened. Attacks from Hezbollah on Israel triggered a retaliation from the latter, while Tehran launched missiles and drones at Israel, the Gulf states and a UK airbase near Cyprus.

Recently, US President Donald Trump said the operation is going very well. “We’re knocking the crap out of them,” he stated in an interview with CNN. He was asked about how long the war might last, Trump commented that he thought four weeks, but added that they’re ahead of schedule.

Geopolitical uncertainty amidst the Middle East conflict and the lack of progress in peace talks between Ukraine and Russia are likely to underpin bullion prices.

Also, the jump in Oil prices stoked inflation fears, triggering a move in tandem with Gold and the Greenback, according to the US Dollar Index (DXY). The DXY, which tracks the buck’s performance against six currencies, is up 1%, at 98.67 at the time of writing.

Further Gold’s upside as Fed dovish bets weaken the Greenback

Speculation that the Federal Reserve (Fed) policy will ease is a tailwind for Gold price. Money market players are pricing in 49 basis points of easing, down from 61 basis points, according to Prime Market Terminal.

However, traders seem confident that the Fed will reduce rates at least twice in 2026.

The ISM revealed that the Manufacturing Purchasing Managers Index (PMI) in February remained at expansion territory for the second straight month. The ISM revealed that business activity dipped from 52.6 to 52.4. The ISM Prices Paid subcomponent jumped to its highest level in three and a half years, a sign that import tariffs are pushing up input costs.

Analysts at BNP Paribas commented that physical Gold investment demand is a key driver this year. Gold-backed ETFs are showing an accumulation of 2 million so far this year and expect more purchases by Chinese investors than in 2026.

Ahead of the US economic docket will feature speeches by Federal Reserve officials John Williams of the New York Fed, and Kansas City Fed President Jeffrey Schmid.

XAU/USD Technical outlook: Gold retreats from three-week high, eyes on $5,300

Gold’s uptrend remains intact, yet price action shows that bulls are booking profits as the yellow metal has retreated from four-week highs hit during Monday’s European session past $5,400. Momentum remains positive for Gold as depicted by the relative Strength Index (RSI), which remains in bullish territory, far from overbought.

If XAU/USD rises past $5,350, the first resistance would be $5,400, followed by the day’s high at $5,419. Overhead, the next area of interest would be $5,451, the January 30 high, ahead of the record high near $5,600.

Conversely, if Gold tumbles below $5,300, the first support would be the February 27 daily high turned support at $5,279, followed by $5,250. Once surpassed, the next stop would be $5,200.