Gold slides back closer to $4,800 as USD edges higher ahead of US-Iran peace talks
- Gold meets with a fresh supply during the Asian session, though the downside seems limited.
- Inflation fears support US bond yields, underpinning the USD and weighing on the commodity.
- Rising Fed rate cut bets to cap gains for the buck and lend support to the non-yielding bullion.
Gold (XAU/USD) struggles to capitalize on the previous day's goodish rebound from the $4,737 area, or a one-week low, and attracts some sellers during the Asian session on Tuesday. The commodity slides closer to the $4,800 mark, though the downside seems cushioned as traders might refrain from placing aggressive directional bets amid continuing uncertainty over whether talks to end the US-Iran war will take place.
US President Donald Trump announced that US negotiators will travel to Pakistan for another round of negotiations with Iran, aiming to extend a fragile ceasefire that is set to expire on Wednesday. Meanwhile, Iranian officials are hesitant about further peace talks amid the US naval blockade. In fact, Iranian Parliament speaker Mohammad Bagher Ghalibaf said that Iran will not accept negotiations with the US while under threat. Moreover, Iran's Foreign Minister Abbas Araghchi said that continued violations of the ceasefire by the US are a major obstacle to continuing the diplomatic process.
Latest reports, however, suggest that a delegation representing Iran is expected to travel to Islamabad for fresh negotiations with the US. Meanwhile, investors remain sceptical about a potential US-Iran agreement amid the standoff over the Strait of Hormuz, especially after the US Navy intercepted and seized an Iranian-flagged cargo ship in the Gulf of Oman. In response, Iran once again closed the strategic waterway, which acts as a tailwind for Crude Oil prices. This, in turn, revives inflationary concerns and offers some support to US bond yields, exerting some pressure on the non-yielding Gold price.
Furthermore, rising US bond yields offer some support to the US Dollar (USD), which is seen as another factor weighing on the commodity. The USD bulls, however, lack conviction amid diminishing odds for a rate hike by the US Federal Reserve (Fed). Instead, the CME Group's FedWatch Tool indicates that there is a roughly 45-50% chance of a Fed rate cut by the year-end, which should keep a lid on any meaningful USD appreciation and continue to act as a tailwind for the Gold. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further XAU/USD depreciation.
XAU/USD 4-hour chart
Gold bulls have the upper hand as a breakout through 50% Fibo. and 200-EMA on H4 remains in play
The precious metal holds a constructive near-term bias as it sits above the 200-period Exponential Moving Average (EMA) at $4,784.25. The 50.0% retracement level of the March downfall, at $4,762.13, adds a secondary layer of underlying demand beneath the EMA. Meanwhile, momentum gauges remain subdued rather than directional, with the Relative Strength Index (RSI) hovering near a neutral 51, and the Moving Average Convergence Divergence (MACD) indicator is marginally negative. This hints that bulls retain structural control but lack strong follow-through for now.
In the meantime, immediate support is seen at the 200-period EMA at $4,784.25 and then the 50.0% retracement at $4,762.13. A sustained break below this cluster would expose deeper Fibonacci supports at $4,607.05 and $4,415.17 ahead of the broader swing low region near $4,105.01. On the topside, initial resistance emerges at the 61.8% Fibo. retracement at $4,917.21, with further hurdles at the 78.6% level at $5,138.01 and the cycle high region at $5,419.25, where any rejection would likely cap the current bullish phase.
(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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