Gold has regained the $4,800 level on renewed upside in Asia on Thursday but remains confined within a $200 range so far this week. Gold traders await a breakthrough in the US-Iran peace talks for a fresh directional impetus.
Gold capitalizes on USD weakness
Gold’s latest uptick is mainly driven by a fresh leg lower in the US Dollar (USD) against its major currency rivals, as risk-on flows dominate and diminish the buck’s safe-haven appeal.
Markets remain highly optimistic about a likely deal to end the Iran war with the United States (US). Also, expectations for de-escalation between Israel and Lebanon, as both sides head for negotiations on Thursday, add to the improved market mood.
US President Donald Trump confirmed that Israel and Lebanon peace talks will take place later in the day.
Furthermore, strong Chinese first-quarter Gross Domestic Product (GDP) data and upbeat US banks’ earnings reports shifted focus back to fundamentals and helped keep the broader sentiment elevated.
China’s economy grew at 5% on an annual basis in the first quarter, shrugging off the initial impact of the Iran war, beating the estimated increase of 4.8%.
Meanwhile, strong quarterly earnings from Bank of America and Morgan Stanley drove the indexes to record highs, lifting global stocks subsequently.
Besides a risk-on mood, the USD also bears the brunt of Trump’s attacks on US Federal Reserve (Fed) Chairman Jerome Powell.
On Wednesday, Trump threatened to fire Powell from his separate seat on the Fed’s Board of Governors if Powell does not vacate that post as well when his term as Fed chief ends on May 15, intensifying concerns surrounding the US central bank’s autonomy.
Looking ahead, the next decisive move in Gold will depend on further developments in the Middle East geopolitical scenario, as a set of peace talks will be closely scrutinized.
Reuters quoted a source from Tehran on Wednesday as saying that “Iran could consider allowing ships to sail freely through the Omani side of the Strait of Hormuz without risk of attack as part of proposals it has offered in negotiations with the US.”
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,825.56. The metal holds a neutral-to-bullish tone as it trades above the 21-day and 100-day simple moving averages (SMAs), while the 50-day SMA at $4,898.33 caps the topside and marks the next directional trigger. The 200-day SMA, well below price near $4,208.24, underpins the broader uptrend, and the upward-sloping support trend line beneath the market reinforces the idea of a corrective phase within a larger bullish structure. A Relative Strength Index (RSI) reading around 53 suggests modest positive momentum without overbought conditions, allowing room for either a renewed push higher or further consolidation.
On the topside, immediate resistance is located at the 50-day SMA around $4,898, and a daily close above this barrier would open the way for a more decisive recovery towards prior record highs. On the downside, initial support is seen near the 100-day SMA at roughly $4,709, followed by the 21-day SMA around $4,649, with the rising trend-line support near $4,582 acting as a deeper buffer before the more distant 200-day SMA at about $4,208. A sustained break below this stacked support area would be needed to materially dent the prevailing bullish longer-term bias.
(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.
