Gold (XAU/USD) rebounds from the $4,633-$4,632 area, or a four-day trough touched during the Asian session on Monday, and fills a major part of the weekly bearish gap amid mixed cues. The Wall Street Journal, citing officials familiar with the matter, reported that regional countries are racing to bring the US and Iran back to the negotiating table within days after talks over the weekend ended without an agreement. This keeps the door open for further diplomacy and fails to assist the US Dollar (USD) in capitalizing on its intraday gains, which turns out to be a key factor offering some support to the commodity. The fundamental backdrop, however, warrants some caution before positioning for any meaningful upside for the precious metal.
US Vice President JD Vance said that he placed a final and best offer on the table, but Iran declined to accept the terms, leading to a stalemate. Iranian state media said that excessive demands sank the possibility of a deal. Meanwhile, US President Donald Trump said on Sunday the US Navy would start blockading the Strait of Hormuz, jeopardizing a fragile two-week ceasefire. Moreover, continued Israeli strikes in Lebanon raise the risk of a renewed escalation of tensions in the Middle East, which could benefit the USD’s reserve currency status. This, along with expectations that major central banks will adopt a more hawkish stance due to the war-driven surge in energy prices, might contribute to capping the upside for the non-yielding Gold.
In fact, West Texas Intermediate (WTI) – the benchmark US Crude Oil price – rallies back to the $105/barrel mark in reaction to the latest geopolitical developments. This comes on top of data released on Friday, which showed that inflation in the US surged by the most in nearly four years during March. According to the US Bureau of Labor Statistics, the headline US Consumer Price Index (CPI) rose 0.9% from February and picked up to 3.3% from a year ago. This led investors to abandon bets on Fed rate cuts this year and shift focus to potential interest rate hikes. The outlook, in turn, triggers a fresh leg up in US Treasury bond yields and validates the USD bullish bias, warranting caution before placing aggressive bullish bets around the XAU/USD pair.
XAU/USD 1-hour chart
Gold seems vulnerable as an intraday breakdown below the 100-hour SMA remains in play
The commodity maintains a mildly bearish near-term tone as it holds beneath the 100-hour Simple Moving Average (SMA) support breakpoint. Moreover, the Moving Average Convergence Divergence (MACD) remains in negative territory despite contracting bearish readings. Adding to this, the Relative Strength Index (RSI) lingers below the midline near 44, suggesting that downside pressure persists but with waning momentum.
On the topside, immediate resistance is located at the 100-hour SMA around $4,732.63, and a sustained break above this barrier would be needed to ease the current downside bias and open the way for a stronger recovery. On the flip side, any pullback from current levels would likely see traders watching prior session lows and short-term swing troughs as the next potential demand areas.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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