Gold has reversed Monday’s recovery, returning to the red below $4,550 early Tuesday, as markets turn risk-averse and flock back to safety in the US Dollar (USD).
Gold falls on doubts over the fragile US-Iran ceasefire
The resurgent haven demand for the USD weighs heavily on Gold as the latest so-called self-defence strikes conducted by the United States (US) Central Command forces in southern Iran raise concerns about the sustainability of the fragile ceasefire between the US and Iran, reviving risk-off flows across financial markets.
On the other hand, US President Donald Trump lauded the ongoing peace talks with Iran, citing them as ‘going nicely’. However, Trump did not hesitate to warn of fresh attacks if those fail yet again.
With the US-Iran ceasefire appearing on tenterhooks amid persistent deadlock, Oil prices have caught a fresh bid in Asia this Tuesday, with WTI climbing back toward the $100 mark.
Resurfacing inflation concerns on renewed strength in Oil prices put hawkish expectations around the US Federal Reserve (Fed) back to the fore, exerting additional downside pressure on the non-yielding Gold.
Markets are expecting the Fed to hike interest rates by the end of this year, with the odds of such a move standing at a little over 50%, according to the CME Group’s FedWatch Tool.
On Monday, Gold staged an impressive turnaround toward $4,600 on fresh optimism that the US and Iran were close to signing a peace agreement to end the three-month-long war and reopen the Strait of Hormuz.
Looking ahead, markets will stay glued to any further developments on the US-Iran peace talks and the fray ceasefire, as the US economic calendar has little of note for bullion traders, barring the Consumer Confidence data.
Meanwhile, the Oil price action could also have a strong bearing on Gold’s movement in the upcoming sessions.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,534.70, keeping a bearish near-term bias as spot holds beneath the short- and medium-term moving averages while clinging to a nearby trend-line pivot. Price sits below the 21-day simple moving average (SMA) at $4,601.30 and the 50-day SMA at $4,648.46, suggesting rallies remain capped for now, while the Relative Strength Index (14) around 43 hints at subdued, rather than extreme, downside momentum.
On the topside, initial resistance is located at the 21-day SMA near $4,601, followed by the 50-day SMA around $4,648, with the 100-day SMA much higher at $4,801.78 reinforcing the broader corrective tone. On the downside, the immediate focus is on the current pivot zone around $4,534; a clear break lower would expose the 200-day SMA at $4,388 as the next notable support, where the former falling wedge resistance converges.
(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.
