Gold reverses a part of the previous decline early Friday, taking on the $4,400 level once again. Despite the rebound, the bright metal remains on track to book its fourth straight weekly loss.
Gold eyes a down week amid Mideast risks
Gold remains vulnerable from a broader perspective as the US Dollar (USD) continues to ride higher on the safe-haven demand amid looming risks of a US ground military operation on Iran’s Kharg Island as early as this weekend.
This comes after the Wall Street Journal (WSJ) reported late Thursday, citing defence department officials with knowledge of the planning, the Pentagon is looking at sending up to 10,000 additional ground troops to the Middle East to give US President Donald Trump more military options even as he weighs peace talks with Tehran.
Amid a divide on both sides over a de-escalation, investors remain on edge even though Trump announced that he will extend the pause on his threat to attack Iran’s energy infrastructure for 10 days until 6 April.
However, markets fail to buy Trump’s words, anticipating that the war is unlikely to end anytime soon.
That said, concerns over higher-for-longer Oil prices and rising inflation prospects have priced out a US Federal Reserve (Fed) interest rate cut this year, keeping the USD supported while acting as a headwind for the non-yielding Gold.
Looking ahead, Gold could see some short-covering heading into the weekend, and following a roughly 20% decline since the war broke out on February 28. The end-of-the-quarter flows
Gold price technical analysis: Daily chart
The near-term bias is mildly bearish as price extends its decline below the 21-day and 50-day Simple Moving Averages (SMAs), with the faster average now turning lower and the intermediate one flattening. This configuration suggests sellers are gaining control after a failed attempt to sustain the earlier uptrend. The 100-day and 200-day SMAs continue to rise well beneath spot, signaling that the broader trend remains up, but their distance from current price highlights the depth of the ongoing correction. The Relative Strength Index (RSI) at 32 hovers just above oversold, indicating persistent bearish momentum with scope for further downside before a more meaningful rebound emerges.
Initial resistance is now seen near the 21-day SMA around $4,900, where a recovery would first confront dynamic selling pressure, followed by the 50-day SMA close to $4,960. A daily close above this latter barrier would be needed to ease the current bearish tone and open the way toward the $5,100 area. On the downside, immediate support emerges at the recent lows around $4,400, with a break below exposing the rising 100-day SMA near $4,630 as the next significant downside objective. A sustained drop toward that average would deepen the corrective phase, while failure to reach it and a bounce from the $4,400 region would signal that dip buyers are starting to defend the longer-term bullish structure.
(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.
