Gold retakes $4,300 as US‑Iran peace deal weighs on USD after hawkish Fed
- Gold regains positive traction following the previous day’s post-FOMC slump to the weekly trough.
- The optimism over a US-Iran peace deal prompts USD profit-taking and supports the precious metal.
- The Fed’s hawkish tilt lifts December rate hike bets, limiting USD losses and capping the commodity.
Gold (XAU/USD) attracts fresh buyers on Thursday and climbs back above the $4,300 mark during the Asian session as the US-Iran peace deal prompts some US Dollar (USD) profit-taking. In fact, US President Donald Trump and Iranian President Masoud Pezeshkian electronically signed a Memorandum of Understanding (MoU) aimed at ending hostilities between the two countries and reopening the Strait of Hormuz. Adding to this, Trump said that the 60-day negotiation period to reach a final agreement on Iran's nuclear program is not a hard deadline, further boosting investors' confidence. This, in turn, drags the USD away from its highest level since late March, touched in reaction to the Federal Reserve's (Fed) hawkish tilt on Wednesday, and turns out to be a key factor supporting the commodity.
As widely expected, the US central bank decided to keep its benchmark interest rate unchanged at a target range of 3.5% to 3.75% at the end of the first meeting under the new Fed Chair, Kevin Warsh. Adding to this, the Fed eliminated the language indicating a bias toward further easing, with the rate-setting committee sending a clear message that it supported higher rates. In fact, policymakers estimated the fed funds rate at 3.8% by the end of this year, up from 3.4% projected in March. Traders were quick to react and are now pricing in a nearly 85% chance of a 25-basis-point (bps) rate hike in December. The outlook led to the overnight sharp rise in US Treasury bond yields and favors USD bulls, which, in turn, might hold back traders from placing aggressive bullish bets on the non-yielding Gold.
Hence, it will be prudent to wait for strong follow-through buying before positioning for the resumption of the precious metal's recent recovery move from the $4,025-$4,020 region, or the year-to-date low, touched last Thursday. Traders now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims later during the North American session. Apart from this, comments from influential FOMC members might provide some impetus to the Greenback and the Gold.
XAU/USD daily chart
Gold needs to surpass $4,350-$4,360 confluence to back the case for additional gains
The overnight failed attempt to find acceptance above the $4,350-$4,360 confluence – comprising the 38.2% Fibonacci retracement level of the April-June fall and the 200-day Exponential Moving Average (EMA) – warrants caution for the XAU/USD bulls. The subsequent slide, however, stalled near the 23.6% Fibo. level, which should now act as a key pivotal point for short-term traders. Meanwhile, the Relative Strength Index (RSI) hovers near 44, signaling subdued momentum. In contrast, the Moving Average Convergence Divergence (MACD) histogram has turned marginally positive, hinting at a tentative loss of bearish pressure rather than a clear bullish reversal.
Hence, it will be prudent to wait for a sustained strength above the $4,350-$4,360 hurdle before positioning for further gains. The Gold might then climb to the 50.0% retracement near $4,461 and further towards higher barriers at $4,562, $4,705 and the recent peak around $4,887. On the downside, initial support is seen at the 23.6% Fibo. retracement near $4,237, with a deeper floor around the prior swing low close to $4,036, where buyers would be expected to defend the broader bullish cycle.
(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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