Gold (XAU/USD) attracts heavy selling heading into the European session on Thursday and extends the previous day’s rejection slide from the 100-day Simple Moving Average (SMA). Moreover, hawkish central banks and a bullish US Dollar (USD) favor the XAU/USD bears, backing the case for a slide back towards challenging a technically significant 200-day SMA, around the $4,100 mark, or a four-month low set on Monday.
Despite US President Donald Trump’s ceasefire rhetoric, Iran publicly rejected claims of ongoing negotiations and said that there is no chance of a deal between the two adversaries. Moreover, Iran turned down a 15-point ceasefire proposal from the US and has reportedly set sweeping demands to wind down the widening Middle East conflict. Apart from this, the deployment of additional US troops in the region raises to the risk of further escalation of the conflict, which continues to underpin the USD’s global reserve currency status and, in turn, is seen weighing on the Gold price.
Meanwhile, energy infrastructure in Iran remains under pressure. Adding to this, the effective closure of the Strait of Hormuz acts as a tailwind for Crude Oil prices, fueling inflationary concerns and bolstering bets for a hawkish stance from major central banks, including the US Federal Reserve (Fed). In fact, traders have nearly priced out the possibility of any further rate cuts by the Fed and are rapidly increasing bets for a hike by the end of this year. This triggers a fresh leg up in US Treasury bond yields, which further supports the USD and contributes to driving flows away from the Gold.
The XAU/USD pair remains highly sensitive to geopolitical headlines, and volatility is expected to remain elevated amid speculation of a potential US ground operation to seize Iran’s key oil export hub at Kharg Island.
XAU/USD daily chart
Gold bears could aim to retest 200-day SMA pivotal support near $4,100
From a technical perspective, the near-term bias is mildly bearish as the XAU/USD pair holds below the 100-day SMA, which capped the overnight move up, suggesting a corrective phase within a broader uptrend. Adding to this, the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal line, reinforcing persistent downside momentum. Furthermore, the Relative Strength Index (RSI) hovers in the low-30s after dipping below 30, indicating that bearish pressure dominates but short-term oversold conditions could slow the decline.
Meanwhile, the 100-day SMA coincides with the 38.2% Fibonacci retracement level of the fall from the monthly swing high, reinforcing a key barrier. A daily close above that area would open the way toward the 50.0% retracement level at $4,770, where sellers could reappear. On the downside, initial support aligns near the 23.6% Fibo. retracement level at $4,422, ahead of the recent swing low at $4,407. A break below this band would expose the $4,300 region, while only a recovery back above $4,614 would start to erode the current bearish tone.
(The technical analysis of this story was written with the help of an AI tool.)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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