Gold is trading back above $4,500 in Asia on Monday, attempting a recovery from seven-week lows near $4,480 amid renewed escalation in the conflict between the United States (US) and Iran.
Gold: Will the rebound last?
Gold kicks off a new week on a bearish note, as markets remain highly unnerved, following the geopolitical re-escalation over the week after the much-touted meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, yielded no material results in the Iran war.
Trump warned, via a Truth Social post, on Sunday: “For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them,” Trump said in a Truth Social post. “TIME IS OF THE ESSENCE!”
Meanwhile, Iran’s semi-official Fars news agency stated that the US had failed to make any concrete concessions in its response to Tehran’s latest proposals to end the conflict.
Furthermore, Reuters reported that a fire near the United Arab Emirates’ (UAE) nuclear power plant was launched by Iran or one of its proxies in what the UAE called a “dangerous escalation”.
Saudi Arabia also reported that three drones it intercepted had entered from Iraqi airspace.
Among other Mideast geopolitical developments, Axios reported that the US is monitoring drone threats from Cuba.
These renewed geopolitical tensions continue to underpin the Oil price rally, accentuating inflation fears and keeping bets alive for a US Federal Reserve (Fed) interest rate hike this year.
“Markets are increasingly pricing in a Fed rate hike before year-end, with a 50% chance of a move by December,” Reuters reported, citing the CME Group’s FedWatch tool.
Hawkish Fed expectations keep the US Dollar’s (USD) attractiveness, as the world’s reserve currency, weighing on non-yielding assets such as Gold.
All eyes remain on any signs of further re-escalation in the Iran war, with the situation in Cuba will also be monitored; both are likely to render positive for the Greenback.
Hence, it remains to be seen if the bright metal sustains the latest bounce from over one-month lows, as traders continue assessing the latest measures imposed by India to curb bullion imports, in a bid to support the rapidly declining Indian Rupee (INR).
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,532.85, keeping a bearish near-term tone as price holds beneath a stack of declining moving averages. The 21-day simple moving average (SMA) at roughly $4,655 and the 50-day SMA near $4,716 sit well above spot and suggest rallies remain corrective within a broader pullback, while the 100-day SMA around $4,790 reinforces a heavier medium-term structure. The Relative Strength Index (14) hovers near 39, indicating subdued momentum that aligns with persistent downside pressure rather than an imminent bullish reversal.
On the topside, initial resistance is located at the 21-day SMA around $4,655, followed by the 50-day SMA at approximately $4,716 and then the 100-day SMA near $4,790, where sellers could defend the broader downtrend. On the downside, immediate support is seen near the former falling wedge resistance now support area around $4,468, ahead of stronger structural backing from the 200-day SMA at about $4,353; a daily close below the trend-line region would likely expose the longer-term average and deepen the corrective phase.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
