Gold sticks to modest gains; bulls seem hesitant amid Fed hike bets, Iran risks
- Gold snaps a three-day losing streak to over a one-week low, though it lacks bullish conviction.
- Easing concerns about inflation and higher interest rates offer some support to the commodity.
- The Iran uncertainty and a hawkish Fed underpin the USD, capping gains for the precious metal.
Gold (XAU/USD) attracts some buyers at the start of a new week and, for now, seems to have snapped a three-day losing streak to a more than one-week low, touched last Friday. Crude Oil prices turn lower following a modest bullish gap after mediators Qatar and Pakistan announced a formal 60-day roadmap aimed at securing a final US-Iran peace deal. This, in turn, helps ease concerns around inflation and higher interest rates, offering some support to the precious metal.
That said, traders are still pricing in a nearly 90% chance that the US Federal Reserve (Fed) will raise borrowing costs by the end of this year. The bets were lifted by the Fed's hawkish forecast last week, signaling that it will need to raise the policy rate this year if inflation remains sticky. Furthermore, the new Fed Chair, Kevin Warsh, focused on price stability during the post-meeting press conference, suggesting that the central bank might not rush to cut rates even in the face of declining growth. Apart from this, geopolitical developments over the weekend act as a tailwind for the US Dollar (USD), which should cap further gains for the Gold.
Iran accused the US and Israel of violating the ceasefire and announced that it had again closed the Strait of Hormuz, citing the continued Israeli strikes in Lebanon. Moreover, US President Donald Trump threatened fresh military action against Iran if Hezbollah continued attacks on Israel. This underscores the fragility of the diplomatic process and keeps the geopolitical risk premium in play. Adding to this, Russia has intensified attacks on major Ukrainian cities in recent weeks, which helps the safe-haven Greenback to stall Friday's pullback from its highest level since May 2025 and keeps a lid on the Gold, warranting caution for bulls.
Moving ahead, all eyes remain on US-Iran headlines, which might continue to infuse volatility across global financial markets. Apart from this, comments from influential FOMC members will drive the USD demand and provide some impetus to the precious metal. Nevertheless, the aforementioned fundamental backdrop suggests that an attempted recovery might still be seen as a selling opportunity and fizzle out rather quickly.
XAU/USD daily chart
Gold might struggle to capitalize on intraday gains amid a bearish technical setup
From a technical perspective, last week's failed attempts to clear the 200-day Exponential Moving Average (EMA) support-turned-resistance, and the subsequent fall, favor the XAU/USD bears. Moreover, the Relative Strength Index (RSI) hovers in the upper-30s, hinting at subdued buying interest. Adding to this, the Moving Average Convergence Divergence (MACD) remains in negative territory with a modestly negative histogram, suggesting that downside momentum is easing but not yet reversed.
Meanwhile, the 200-day EMA near $4,334 should act as the first key level that bulls need to reclaim to alleviate the current bearish pressure. Until that level is recovered on a daily closing basis, rebounds are likely to be viewed as corrective within a broader consolidative decline, with momentum signals implying that further tests of lower levels cannot be ruled out.
(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.