Gold is back in the red early Wednesday, holding below $4,500 after the previous pullback, as sellers retain control amid sustained US Dollar (USD) demand and renewed geopolitical concerns.
Gold looks to US ADP jobs and ISM Services PMI
Following a volatile trading day witnessed on Tuesday, Gold is facing fresh headwinds from the ongoing surge in Oil prices as fresh hostilities erupt in the Gulf, fading hopes for a US-Iran peace deal breakthrough and the reopening of the Strait of Hormuz.
The flaring up of the Mideast tensions keeps the safe-haven demand for the US Dollar (USD) intact, while higher Oil prices continue igniting inflation fears, which bolster the US Federal Reserve (Fed) interest rate hike expectations.
US Central Command said late Tuesday that Iran fired missiles at Kuwait and Bahrain, which were thwarted or failed, prompting US forces to hit back at Iran’s Qeshm Island in the Strait of Hormuz.
In response, Iran’s Islamic Revolutionary Guard Corps (IRGC) attacked the US Fifth Fleet headquarters.
Meanwhile, addressing the US lawmakers on Tuesday, Secretary of State Marco Rubio said Washington will not remove sanctions on Iran in exchange for a full reopening of the Strait of Hormuz, adding that sanctions relief would only come after significant concessions on the nuclear programme and the enriched uranium.
His comments came after President Donald Trump disputed reports that talks with Iran had paused, saying “conversations between us have been going on continuously”, while Tehran was reportedly still studying the latest proposal and had not communicated with the US in several days.
These factors continue to exert bearish pressures on the non-yielding Gold, having checked any upside attempts above the $4,500 level so far this week.
The next of note for Gold traders remains the US ADP Employment Change and ISM Services PMI data due later in the day for a fresh outlook on the economy, which could help gauge the Fed’s monetary policy path going into the Nonfarm Payrolls (NFP) release on Friday.
Meanwhile, the Mideast developments will continue to drive risk sentiment and direction in the USD and Gold as the technical setup leans in favor of sellers.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,484.03. The metal holds a broadly bearish near-term bias as it remains below the 21-day simple moving average (SMA) near $4,575.88 and the 50-day SMA around $4,629.99, keeping prices capped beneath a cluster of short-term trend resistance. The 200-day SMA at roughly $4,422.28 now offers underlying support after being reclaimed, suggesting the broader uptrend is not yet fully compromised, though momentum remains subdued with the 14-day Relative Strength Index hovering near 42, consistent with a weak recovery rather than an impulsive bounce.
On the topside, initial resistance is seen at the 21-day SMA around $4,576, followed by the 50-day SMA close to $4,630, with the 100-day SMA higher up near $4,800 reinforcing a more substantial supply zone if the rebound extends. On the downside, immediate focus falls on the $4,484 area as a near-term pivot, with the 200-day SMA near $4,422 acting as the next key support, ahead of the prior downtrend-line break region around $4,368, where buyers would need to step in to prevent a deeper corrective slide.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
