• Gold rises 0.70%, supported by Middle East tensions and a weaker US Dollar.
• Safe-haven demand for gold spikes following drone attack in Jordan, amid global uncertainties.
• Investor attention on Fed meeting, with prevailing expectations of rate hold and focus on future policy outlook.

Gold price stood firm on Monday, gaining more than 0.70%, sponsored by rising tensions in the Middle East alongside the Greenback (USD) pairing its earlier gains during the day. As the Asian session begins, the XAU/USD exchanges hands at $2031.60, down by 0.07%, after bouncing from a weekly low of $2017.92 yesterday.

XAU/USD to remain higher amid geopolitical risks linked to Middle East conflict

Market participants remain cautious ahead of Wednesday's US Federal Reserve (Fed) monetary policy decision. The Greenback was higher on the day but finished the session virtually unchanged at 103.47, as US Treasury bond yields dropped. Consequently, Gold advanced with geopolitical risks rising in the Middle East.

In regard to that, a drone attack on US citizens in Jordan, which killed three servicemen and 34 wounded, would not be tolerated by the White House, US Defense Secretary Lloyd Austin said “The President and I will not tolerate attacks on U.S. forces, and we will take all necessary actions to defend the U.S. and our troops.”

Aside from this, the US 10-year Treasury bond yield slipped six basis points to 4.07%, increasing the appeal of the non-yielding metal. The Federal Reserve’s January meeting is expected to keep rates unchanged, adopting a more neutral stance instead of December’s dovish pivot by Jerome Powell and Co.

The CME FedWatch Tool shows market participants aren’t expecting a rate cut until the May meeting, with 100% odds for 25 basis points and for a 0.50% cut. That could change once the Fed’s decision is out of the way