Gold (XAU/USD) registered weekly losses, pressured by persistent uncertainty surrounding the Middle East conflict and hawkish guidance from major central banks. While market focus shifts to the April employment report from the United States (US), XAU/USD’s near-term technical outlook highlights a bearish stance.
Gold turns south as Middle East conflict feeds global inflation fears
Investors adopted a cautious stance at the beginning of the week as US President Donald Trump called off the delegation that was supposed to travel to Pakistan over the weekend for the next round of talks with Iran. On Sunday, he reiterated that the Iran war will end soon and they will be victorious, but markets turned risk-averse in the early Asian session on Monday. Later in the day, news that Iran had sent a proposal to end the war and reopen the Strait of Hormuz helped the market mood improve and allowed Gold to limit its losses. Nonetheless, CNN reported that Trump signaled that he was unlikely to accept Iran’s proposal, and Gold closed the day marginally lower.
Crude Oil prices continued to rise on Tuesday after the Wall Street Journal reported that the US President instructed aides to prepare for an extended blockade of Iranian ports. As safe-haven flows dominate the markets, Gold lost nearly 2% on the day.
The US Dollar (USD) gathered strength late Wednesday and triggered another leg lower in XAU/USD, which touched a fresh April low near $4,500. The Federal Reserve left its policy rate unchanged at 3.5%-3.75% in April, as widely expected, but the policy statement highlighted an unusually divided vote. Fed Governor Stephen Miran voted in favor of a 25 basis points (bps) rate cut, as he did at every policy meeting since joining the central bank back in September, while three members of the Federal Open Market Committee (FOMC), Beth Hammack, Neel Kashkari and Lorie Logan, said they agreed with the decision to keep the policy rate steady but voted against the inclusion of an easing bias in the statement.
In the post-meeting press conference, Fed Chair Jerome Powell noted that while the majority of the Committee did not want to change the statement language at this meeting, he also acknowledged that the number of policymakers who would support a move away from an easing bias has increased. Powell adopted a relatively neutral tone, explaining that they are in a good position to move in either direction and adding that they are still slightly restrictive, sitting at the high end of the neutral rate.
After staying on the back foot in the Asian session on Thursday, XAU/USD staged a decisive rebound and gained more than 1.5%, as the USD came under heavy selling pressure following a reported foreign exchange market intervention by Japan. Japanese Finance Minister Satsuki Katayama warned that they were moving closer to taking a decisive action after USD/JPY surged to its highest level since July above 160.70, then the pair declined sharply during the European trading hours. Citing two sources familiar with the matter, Reuters reported later in the day that Japan intervened for the first time in nearly two years to address the JPY weakness.
Gold lost its bullish momentum and turned south on Friday as the USD stabilized and market participants reacted to major central banks’ hawkish tone. The European Central Bank (ECB) left its key rates unchanged but ECB President Christine Lagarde acknowledged that risks to inflation are tilted to the upside, adding that policymakers debated at length about the possibility of an interest rate hike. Citing anonymous central bank sources, Reuters reported late Thursday that the ECB is expected to raise rates in June and opt for one more hike later in the year if Brent Oil prices hold above $100 with the shipping traffic in the Strait of Hormuz remaining disrupted. Moreover, the Bank of England (BoE) maintained its bank rate at 3.75% but one member of the Monetary Policy Committee (MPC) voted in favor of a 25 basis points rate hike. Additionally, the BoE revised inflation projections for 2026 and 2027 higher, while BoE Governor Andrew Bailey said that it would be a mistake to wait for second-round inflation effects before taking policy action. XAU/EUR and XAU/GBP both lost over 3% for the week, highlighting capital outflows out of Gold to the Euro and the British Pound.
Heading into the weekend, reports suggesting that Iran has presented a new proposal to the US to end the conflict helped the risk mood improve and allowed Gold to erase a portion of its weekly losses.
Gold traders stay focused on geopolitics, await US labor market data
The US economic calendar will feature the Institute for Supply Management’s Services Purchasing Managers’ Index (PMI) report for April and JOLTS Job Openings data for March on Tuesday. In case the headline PMI stays in the expansion territory above 50 and the Prices Paid Index, the inflation component of the PMI survey, rises further after jumping to 70.7 in March from 63 in February, the USD could preserve its strength and force XAU/USD to stay on the back foot.
On Friday, the US Bureau of Labor Statistics will publish the April employment report, which will feature Nonfarm Payrolls (NFP), Unemployment Rate and wage inflation figures. A significant negative surprise in the NFP print, especially if combined with an uptick in the Unemployment Rate, could help Gold gain traction heading into the weekend. Conversely, an NFP print near the market expectation, or better, could have the opposite effect on XAU/USD.
Still, the reaction to the US employment report could remain short-lived while the uncertainty surrounding the Middle East crisis persists.
In case US and Iran fail to move closer to ending the conflict and reopening the Strait of Hormuz, global inflation fears could continue to heighten, making it difficult for Gold to find demand. If there is a sharp decline in Crude Oil prices, with markets turning optimistic about a resolution in the Middle East, XAU/USD could gather bullish momentum.
Investors will also scrutinize comments from Fed policymakers throughout the week. The CME FedWatch Tool currently shows that markets are pricing in only about a 10% probability of a 25 basis points (bps) Fed rate by end-2026. If Fed officials argue that they will need to keep the policy restrictive for longer, even if the US-Iran war ends soon, the USD could stay resilient and cap any potential gains in XAU/USD. On the other hand, investors could turn hopeful about a policy-easing step later in the year if policymakers downplay inflation concerns and suggest they need to focus on supporting the economy and the labor market.
Gold technical analysis points to a bearish tilt
The Relative Strength Index (RSI) indicator on the daily chart dropped toward 40 and Gold registered consecutive daily closes below the 20-day and the 100-day Simple Moving Averages (SMA), reflecting a buildup in bearish pressure.
On the downside, $4,500, the Fibonacci 61.8% retracement of the November-February uptrend, aligns as a key support level. A daily close below this support could attract technical sellers and pave the way for an extended slide toward $4,400 (static level), $4,280-$4,245 (200-day SMA, Fibonacci 78.6% retracement).
Looking north, the first resistance level could be spotted at $4,685 (Fibonacci 50% retracement) ahead of $4,760 (100-day SMA) and $4,830-$4,870 (50-day SMA; Fibonacci 38.2% retracement).
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.
