Gold holds near $4,200 as traders weigh US-Iran deal prospects
- Gold consolidates after Thursday's rebound but remains on track for a second straight week of losses.
- Traders await fresh updates on US-Iran negotiations after Trump said an agreement could be signed soon.
- Technically, XAU/USD remains bearish, with the RSI near 35 indicating subdued upside momentum.
Gold (XAU/USD) consolidates on Friday as traders await further developments on a potential US-Iran peace deal. At the time of writing, XAU/USD is trading flat around $4,200 after recovering from a nearly seven-month low of $4,023 touched the previous day.
US President Donald Trump said on Thursday that he had canceled planned military strikes on Iran and claimed a peace agreement could be signed as soon as this weekend.
Trump's statement lifted market sentiment, with Gold rallying more than 3% and retracing part of the losses recorded earlier this week, as the US Dollar (USD) and Oil prices lost ground.
Iran's Foreign Ministry spokesperson said the framework text is "nearly finalized," according to the Islamic Republic News Agency (IRNA). A memorandum of understanding (MoU) between the US and Iran could be signed as soon as Sunday in Geneva, Bloomberg reported, citing senior officials.
However, Bullion is struggling to extend the previous day's gains amid uncertainty over Tehran's final approval. The upside also appears limited after this week's US inflation data reinforced expectations that the Federal Reserve (Fed) may need to keep interest rates higher for longer. Higher borrowing costs tend to weigh on non-yielding assets such as Gold.
The Consumer Price Index (CPI) climbed to 4.2% YoY in May from 3.8% YoY in April, marking its highest level since April 2023. The Producer Price Index (PPI) rose 6.5% YoY from 5.7%, its strongest pace since November 2022.
Hawkish Fed expectations and lingering doubts over whether a US-Iran agreement is imminent also help limit losses in the Greenback, leaving the precious metal on track for a second straight weekly loss.
The US Dollar Index (DXY), which measures the Greenback's value against a basket of six major currencies, trades around 99.75, holding modest intraday gains.
On the data front, the US economic calendar features the preliminary University of Michigan (UoM) Consumer Sentiment Index for June, due later in the American session.
Technical analysis: Bears stay in control as RSI signals weak momentum
XAU/USD remains in a bearish near-term bias as price holds below the 20-day Simple Moving Average (SMA) from the Bollinger Bands at roughly $4,425, leaving the recent bounce looking corrective within a broader downswing.
Momentum is weak on the daily chart. The Relative Strength Index (RSI) sits around 35, showing subdued upside momentum, while an elevated Average Directional Index (ADX) near 35 suggests the prevailing downtrend remains technically strong even as volatility compresses within the Bollinger envelope.
On the downside, initial support emerges near the lower Bollinger Band around $4,149, ahead of more substantial horizontal demand at $4,000, where buyers would be expected to defend a deeper pullback.
On the topside, a recovery would first face resistance at the Bollinger mid-line / 20-day SMA near $4,425, with a further barrier at the upper Bollinger Band near $4,701, which together define the key zone that bulls would need to reclaim to ease the current bearish tone.
(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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