On Tuesday, gold experienced a historic surge driven by the anticipation of U.S. monetary easing and persistent global uncertainties, attracting substantial interest from momentum-driven funds. Supported by robust fundamentals, such as strong physical demand in Asia, central bank acquisitions, and its role as a safe-haven asset, gold is positioned for a noteworthy trajectory.

Rhona O’Connell from StoneX highlights the self-fulfilling dynamics of the surge, triggering stop orders and drawing momentum funds. From a technical standpoint, a Fibonacci projection on the XAUUSD H1 chart, sourced from Finlogix Charts, suggests a potential climb to $2,180.

Analyst Ross Norman foresees a rise to $2,300 within six months, attributing it to anticipated Federal Reserve rate cuts. However, gold-backed ETF holdings, notably SPDR Gold Trust’s GLD, have decreased by 7% this year.

Gold has extended gains over the last two trading sessions, recording an almost 3.5% increase (equivalent to $70). Prices are in proximity to the previous all-time high in December, prompting expectations of a retest of this significant milestone amidst increased market volatility.

Despite the absence of a corresponding decline in U.S. yields or the dollar, significant gold purchases by central banks globally may be influencing the paper price of gold. Additionally, growing confidence in the likelihood of a Fed rate cut in June could contribute to the current rally.

Lower interest rates enhance the appeal of the non-interest-bearing metal, typically leading to higher gold prices. The safe-haven allure of gold remains relevant, especially amid ongoing conflicts in eastern Europe and the Middle East. However, positive risk sentiment in equity markets, marked by all-time highs in major indices, is tempering the impact of gold's safe-haven appeal on price support.

This week's critical events/data, including non-farm payrolls, the ECB rate-setting meeting, U.S. services PMI data, Powell's congressional testimony, and the ECB's monetary policy updates, will be closely monitored by traders. The significance is heightened by Super Tuesday, where a majority of U.S. states cast their votes in the presidential primaries. These events add an extra layer of importance to the ongoing gold market dynamics.

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