Gold storms through the roof in Asia on Wednesday, building on the previous rebound and hitting the highest level in three weeks, courtesy of the war relief headlines.
Gold: Trump’s TACO saves the day
Markets are rejoicing soothing headlines on the Middle East war front, as risk-on flows return with a bang and trigger a sharp sell-off in the go-to safe haven – the US Dollar (USD) across the board.
The United States (US) and Iran brokered a two-week ceasefire and agreed to entering negotiations on April 10, potentially paving the way for a lasting peace in the Middle East and resumption of Gulf oil and gas exports through the vital Strait of Hormuz.
Trump had earlier threatened extensive attacks on Iran’s civilian infrastructure.
The sell-off in the Greenback provides the much-needed boost to Gold, as the bullion gains nearly 3% so far.
However, it remains to be seen if the ceasefire-led relief lasts as markets assess the details about the ceasefire with Iran’s ten-point proposal.
An Iranian official confirmed that the ten-point proposal included controlled transit through the Strait of Hormuz coordinated with Iranian armed forces, ending war against Iran and allied groups, withdrawal of US combat forces from all regional bases, lifting all primary and secondary sanctions, payment of full compensation to Iran and release of all frozen Iranian assets.
Additionally, Iran’s Supreme National Security Council said that the proposal also included a condition that Iran would continue its enrichment of Uranium.
Looking ahead, Gold’s upside could be limited as investors remain wary on whether US President Donald Trump will stick to the ceasefire agreement ahead of Friday’s negotiations on the ten-point proposal.
The Iranian proposal submitted to the US includes maximalist demands that the Trump administration previously rejected.
Meanwhile, Iranian attacks continued in the Middle East and on Israel as missile alerts kept sounding, despite the ceasefire.
The focus will now shift toward the US fundamentals amid the truce, with the Minutes of the Federal Reserve (Fed) March meeting eagerly waited for fresh cues on a potential interest rate hike this year.
In his recent speech, Fed Chair Jerome Powell stuck to a wait-and-see stance on the interest rate outlook, pushing back against expectations of a likely hawkish pivot.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD is holding a constructive near-term bias as spot remains above the 21-day, 100-day and 200-day simple moving averages (SMAs). The short-term 21-day SMA at $4,737.69 rises beneath price and, together with the positively sloped 100-day SMA at $4,668.08, suggests the broader uptrend is still intact despite recent volatility, while the 200-day SMA down at $4,165.14 underpins the longer-term bullish structure. The Relative Strength Index (14) has firmed back to around 52, shifting out of neutral-low territory and hinting that downside momentum has faded for now.
On the topside, immediate resistance is seen at the 50-day SMA, currently near $4,929.20, and a daily close above this barrier would open the way for a retest of the recent record area. On the downside, initial support aligns at the 21-day SMA around $4,737.69, ahead of stronger demand near the 100-day SMA at $4,668.08; a break below these layers would expose the more distant but pivotal 200-day SMA at $4,165.14 as the next key floor.
(The technical analysis of this story was written with the help of an AI tool.)
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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.
